Pig iron sales at auctions conducted by Steel Authority of India Ltd. (SAIL) fell sharply by around 50% m-o-m in October on weak domestic steel market fundamentals. Sales plunged to their lowest point since SAIL commenced auctions in June 2020: compared with over 30,000 tonnes (t) in September, sales dropped to just 15,600 t in October, SteelMint data shows.
Although sales from Bhilai Steel Plant (BSP) increased to 8,000 t from 4,500 t in September, the other integrated SAIL plants reported weaker sales. Rourkela Steel Plant (RSP) managed to sell only about 3,700 t at auctions compared with over 8,000 t in September, while Bokaro Steel Plant (BSL) witnessed auctioned volumes dropping sharply to 300 t from over 12,000 t in the preceding month. Durgapur Steel Plant (DSP) sold around 3,500 t of pig iron.
- Market scenario
Pig iron auctions received tepid response in October due largely to subdued steel demand in the domestic market. Demand dampened during the festive season and with pileup of inventory as mills resumed full-fledged operations after scheduled maintenance breaks in the July-September period following the imposition of export duty on finished steel in late May.
Incidentally, October also saw the arrival of around 65,000 t of imported Russian-origin pig iron cargoes that were booked sometime in August when domestic prices were higher due to supply tightness in the market amid maintenance breaks by the leading mills.
- Price scenario
Tata Steel’s newly-acquired subsidiary, NINL, also resumed operations in mid-October. The plant has crude steel capacity of 1.1 mnt/year and pig iron production is estimated at around 70,000-80,000 t per month.
Hence, with increasing supplies in the market amid dull steel demand, pig iron prices remained under considerable pressure. The top merchant suppliers reduced prices, which coincided with falling bids at SAIL auctions. At SAIL-BSP’s auction on 20 October prices dropped INR 500/t from 10 October. Also, at RSP’s auction on 21 October, bids crashed by INR 1,400/t compared with 14 October.
Domestic pig iron prices have been on a downward trajectory since mid-October. SteelMint assesses steel grade pig iron prices at INR 39,300/t exw Durgapur – a decrease of 10% m-o-m from INR 43,700/t exw a month back.
- Outlook
Prices are likely to remain subdued especially because scrap and metallics prices are also trending lower. Sales at SAIL auctions are unlikely to edge up substantially in November as overall steel market sentiments remain bearish.
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