- Secondary steelmakers face margin pressure amid rising coal prices
- Buyers avoid aggressive stocking due to uncertain steel demand
Iron ore prices in Karnataka on 14 May reflected divergent market dynamics amid continued weakness across the steel value chain. Low-grade fines (Fe 57%) remained largely unchanged w-o-w at INR 2,450/t ($26/t) ex-mines, as cautious buying sentiment and limited trade activity kept the market rangebound. In contrast, benchmark Fe 62% fines increased by INR 100/t ($1/t) w-o-w to INR 4,950/t ($52/t), supported primarily by tight availability of quality high-grade material, which has increasingly emerged as a premium segment in the current market scenario.
The overall market, however, continued to face significant pressure from deteriorating downstream fundamentals. Sponge iron prices remained under stress amid falling finished steel prices and persistently weak demand from the construction sector. Although the summer season traditionally supports stronger construction activity, market participants noted that demand recovery in the region has remained considerably slower than expected this year.
Adding to the pressure, rising imported coal prices, influenced by ongoing geopolitical tensions in the Middle East, have sharply increased production costs for sponge iron manufacturers. Industry participants highlighted that the mismatch between elevated input costs and weak finished steel realisations has severely impacted operating viability, particularly for secondary steel producers. As a result, procurement activity in the raw material market remained subdued, with buyers adopting a highly selective approach.
Auction activity during the week was limited; however, the response to high-grade lump auctions was notably strong, with buyers aggressively bidding premiums over base prices. Other auctions were largely concluded at base levels, further underlining the sharp preference for superior-grade material in the market. In addition, a few direct deals reported during the week indicated continued buyer acceptance for quality cargoes despite the broader sluggish market conditions.
Commenting on the outlook, a Bellary-based seller stated, “Going forward, raw material prices are expected to strengthen further, particularly for premium-grade ore, which continues to receive healthy market response despite weak overall sentiment.”
Meanwhile, a buyer noted, “Coal prices are rising steadily, but finished steel prices are not supporting the increase. While integrated primary producers may be able to absorb some pressure, secondary steelmakers are likely to face significant operational challenges if current conditions persist.”
Rationale
- One (1) trade via e-auction was recorded for Fe 57% in this publishing window and was taken into consideration. Hence, the T1 trade category was accorded 50% weightage.
- Thirteen (13) offers and indicative prices were reported, out of which ten (10) were considered as T2 trades. These were accorded 50% weightage.
C-DRI prices fall by INR 300/t ($3/t) w-o-w in Bellary: Prices of sponge iron (CDRI) in Bellary fell by INR 300/t ($3/t) w-o-w to INR 26,700/t ($279/t) amid weak buying interest from steel mills, as sluggish finished steel demand continued to impact raw material procurement activities. Most steel manufacturers remained cautious in fresh bookings due to slow movement of finished goods and pressure on steel margins.
Additionally, logistics constraints further affected market sentiment, particularly for long-distance movement towards western India. Shortage of vehicle availability and operational disruptions caused by fuel-related issues delayed dispatches and increased transportation uncertainties. Owing to these challenges, several buyers refrained from booking material from Bellary, which ultimately pressured CDRI offers in the region.
Karnataka iron ore sales scenario (8-14 May 2026)
Outlook
Iron ore prices in Karnataka are expected to remain largely rangebound in the near term amid weak downstream steel demand and cautious procurement activity from sponge iron manufacturers. However, any stability or marginal recovery in sponge iron prices could provide temporary support to ore prices.
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