Standalone sponge iron manufacturers in the state of Odisha are now more inclined towards making pellet-based DRI rather than iron ore (lumps) due to cheaper cost, lower investments and risk factors. SteelMint, while talking to a few 100-300 tonnes per day (tpd) units, learnt that these producers are facing difficulties in producing sponge C-DRI due to higher costs and logistic concerns.
The cost of producing pellets, on the other hand, is lower compared to iron ore lumps. So, most of the plants have shifted towards making sponge P-DRI and a few more are planning to opt for the same.
Reasons behind this shift
- Lesser iron ore availability: This is the key factor behind this shift as iron ore availability has become restricted due to transportation issues because of the monsoon.
- Liquidity crisis: Another major factor behind this shift is that adequate funds are not available in the market. Thus, the plants can make low investment in procuring pellets. Also, cheaper prices of pellets attract them.
- Need to reduce risk factors: Sponge manufactures are opting for raw pellets to reduce risks. Working with bulk iron ore increases the fund burden on manufacturers. However, they are waiting for clearer directions from the market.
Outlook
As per SteelMint’s assessment, there was a huge uptick of INR 5,500/t in sponge iron prices in the past one month. Rising coal prices and its supply crunch are major factors which may support higher sponge iron prices.
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