India: Sponge iron prices slump amid volatile steel market sentiments

Indian sponge iron (PDRI and CDRI) prices saw a sharp decline m-o-m across key markets in April, 2022.

Prices were on a downtrend since the beginning of the month but picked up slightly towards mid-April. In late-April, prices again started falling owing to volatility in coal prices.

Prices across markets

• Raipur: Pellet-based sponge iron (PDRI) prices decreased in April. The monthly average of SteelMint’s benchmark sponge iron (PDRI) prices stood at INR 36,780/tonne (t) exw Raipur in April, down INR 4,120/t against INR 40,900/t in March.

Around 70,900 t of PDRI deals were recorded by SteelMint last month.

Iron ore-based sponge iron (CDRI) prices stood at INR 38,480/t exw Raipur, down INR 3,720/t m-o-m.

• Bellary: PDRI prices fell by INR 2,420/t m-o-m to INR 36,530/t exw. Around 60,430 t of deals were recorded in April.

CDRI prices were assessed at INR 37,770/t exw, lower by INR 1,900/t compared to March. SteelMint recorded 38,870 t of CDRI deals last month.

• Rourkela: Sponge CDRI prices in this region stood at INR 38,160/t exw, down INR 3,040/t m-o-m in April. About 67,510 t of deals were recorded by SteelMint last month.

Factors weighing on sponge iron prices

• Weak demand due to power cuts: Demand for sponge iron in the domestic market decreased amid power cuts in several states including Chhattisgarh, Andhra Pradesh and Punjab.

In addition, buyers remained largely inactive and reduced their bids on account of the decline in offers due to poor offtake of semi-finished steel products.

• Falling billet prices: Domestic steel billet prices dropped on lower bids and weak demand on account of limited enquiries for finished steel products. Buyers showed reluctance at higher offers which limited spot trades despite ongoing power cuts in central India, which largely affected production of furnaces.

SteelMint’s steel billet index decreased by INR 1,250/t m-o-m in April to INR 55,920/t exw Raipur.

• Pellet prices on downtrend: Domestic pellet prices saw a declining trend in April, falling by around 20% m-o-m. Weak domestic demand and fall in sponge iron offers weighed on pellet prices.

The monthly average of SteelMint’s PELLEX was down by 13% m-o-m to around INR 11,975/tonne (t) in April.

Outlook

SteelMint expects that sponge iron prices in the near-term may remain under pressure due to limited production of furnaces and declining prices of substitute products and raw materials.