India: Pig iron prices plunge at SAIL auctions in May even as sales improve

• Sales rise over 100% on month on low April base
• Prices drop steeply post export duty announcement
• Market stabilising slowly in early June

Pig iron sale volumes at auctions held by Steel Authority of India Ltd. (SAIL) increased by over 100% on the month in May 2022 to 43,450 tonnes (t) from a meagre 19,700 t in April, as per data maintained with SteelMint. It may be mentioned sales slipped 52.53% m-o-m in April as pig iron prices remained steep on the back of a sharp surge in coal and coke prices and due to limited allocations by SAIL.

Despite the recovery in the sales momentum, prices at SAIL’s auctions fell significantly throughout May and especially in the last week after the government announced a 15% export duty on finished steel products as well as pig iron on 21 May.

SteelMint data show that the highest sales volumes were grossed by SAIL’s Rourkela Steel Plant (RSP) at over 28,000 t, followed by Bokaro Steel Ltd (BSL) and Durgapur Steel Plant. Notably, SAIL’s Bhilai Steel Plant (BSP) recorded sales of around 2,000 t from nil in April.

Prices crash post-duty announcement

Declining bids in auctions were witnessed in the first half of the month as well as lack of purchase interest on high floor prices. The auction for 6,000 t on 11 May from BSL attracted a weighted average price of INR 53,450/t exw – down INR 5,550/t against the BSL auction on 20 April.

Towards the middle of the month auctions from DSP and RSP saw bid prices falling in the range of INR 3,500-5,000/t in line with the reduction in prices by merchant pig iron producers, mainly on lack of buying interest due to weak finished steel demand, declining metallics and scrap prices and falling export realisations.

After the export duty announcement, however, prices at SAIL auctions started sliding even more sharply. The 2,000 t pig iron auction on 25 May BSL saw prices dropping to INR 45,250/t exw – more than INR 8,000/t compared with INR 53,450/t exw received at the 11 May auction.

At the 26 May auction for 6,000 t of basic pig iron RSP buyers booked just 1,200 t at a weighted average price of INR 44,300/t exw, with bid prices decreasing by around INR 6,500/t against the previous auction on 20 May.

Pig iron prices revealed a declining curve throughout May, with prices falling from INR 56,000/t levels in early May to below INR 40,000/t at auctions in June. This is in line with falling metallurgical coal and coke prices. Domestic blast furnace grade coke prices, for instance, have dropped to INR 47,000/t from around INR 54,000-55,000/t a month back and seaborne coking prices have fallen sharply too.

The export duty blow had unsettled the market initially and steel prices were in free fall. However, auctions in early June are showing a slow and gradual recovery in prices and buying interest is improving on lower offers.