India: Will firm Sponge Prices encourage Scrap Buying?

Scrap prices fell in tune with Billet price post Diwali. But, stability in Sponge iron prices may create room for Scrap imports.

Billet prices, which were speculated to surge post Diwali, have sloped down. Scrap followed suit with a fall of USD 5/MT in offers. Whereas, Sponge iron was found odd one out here, maintaining prices at the same level.

In FY14, Sponge iron consumption in India was around 23-24 MnT whereas total Scrap consumption stood at 13-14 MnT (out of which about 4.5 MnT was imported).

Sponge Iron resists for Price Correction

While analyzing the Sponge price movement, SteelMint learned that the quantum of correction observed in Sponge prices was comparatively smaller than Scrap & Billet prices.

Market speculations are high that Sponge prices may remain stable at these levels. It is to be noted that prevailing uncertainties in procurement of Iron ore & coal have led to higher domestic prices, which has restricted sharp correction in Sponge iron prices. Market anticipates that Sponge manufacturers are likely to scale down their production to hold prices at these levels.

In case of stability in Sponge prices, some Scrap importers are optimistic that buying interest for Scrap may improve in next month.

Industry experts anticipate imports of Scrap are likely to grow to an extent of 5.5-6 MnT owing to falling Scrap prices in the global market and expected fall in Sponge production.

*USD/MT
Source: SteelMint Research

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