SteelMint in conversation with few 100-500 TPD standalone sponge iron manufacturers learned that they are facing difficulties to produce sponge P-DRI due to high cost of pellets. Most of plants have shifted towards sponge iron (C-DRI) due to low price of lumps (compared to pellets) along with a premium on produced material.
As per Central India Raipur based manufacturers, they have halted fresh booking for raw pellets as the selling price of P-DRI is quite low at INR 27,000/t. Ideally it should be not less than INR 28,000/t exw, depending on the plant capacity. As a result most of the sponge P-DRI makers switched to DR-CLO sponge production.
Similarly, as the situation in Southern India was the same, a shift to sponge C–DRI production has been seen.
Few manufacturers also reported that if the pellet prices remain high and sponge prices do not move up, they are likely to switch from P-DRI production to make sponge C-DRI which is produced from Iron ore lumps and sold at premium of around INR 1,000-1,500/t in comparison with sponge P-DRI.
Also, similar comments were received from West Bengal & Odisha based sponge manufacturers. So, it seems the producers may push up prices higher and if prices come under pressure they may go for production cuts to match demand-supply to keep prices supported.
Outlook
As per SteelMint’s assessment, there was a slight uptick of INR 1,000 – INR 1,500/t in sponge iron offers, in the past one month. It seems that prices will not be under pressure in the coming week after festival holidays as production utilization & stock position is average among suppliers.
There are lessened chances of immediate fall in raw material (Iron ore & pellet) prices due to healthy export realizations. In addition to it, rising coal prices is another major factor which may support sponge prices in coming days.
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