Karnataka’s sponge iron sector observed a decline in production as well as trading activity over the last 2-3 weeks. Participants reported a shortage of material because several plants have been running at 50-60% capacity while many have shut down temporarily.
Most mill owners have opted to move to the sidelines waiting for clearer market directions amid the current pan-India downtrend in finished steel demand. The tepid steel demand is leading to lower offtake in sponge iron. That apart, the upcoming festive holidays are also keeping demand and thus sales of sponge iron down.
Major reasons behind drop in sponge iron sales:
- Impact of monsoon on production: The rains impacted sponge iron production, which led to a shortage in pellet-based DRI (PDRI) as well as lumps-based sponge iron (CDRI) which led to impact on grades yield in production sources reported they are facing difficulties meeting the desired grades required as per demand.
- Logistical constraints: Due to heavy rainfall in Karnataka’s region transport/ loading facility and dispatch for sponge iron has been highly affected on a large scale especially near Bellary, Hospet and Koppal area sources reported.
- Coal availability: Shortage of coal at port and delay in vessel arrival pushed coal offers at a higher level which is not working out for sponge manufacturers to matchup with demand, downtrend in domestic steel market and poor sentiments led various sponge manufacturers to run partially or hold production for short term.
- Buyers switched to East: Most of the Jalna buyers opting to procure sponge iron lumps from Odisha region due to easy availability of material at lower price.
Karnataka contributes about 9% in India’s sponge iron capacity of 57.4 mn t pa.
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