- Subdued demand, bearish sentiments pull down prices
- 15% duty puts a damper on exports
- Sluggish steel sales keep pig iron demand lower
- Sponge iron, scrap prices also down
- Sluggishness in pig iron market to continue
Morning Brief: Indian domestic pig iron prices have been under pressure due to seasonally weak demand, falling sponge iron and scrap (substitute products) prices and drop in export realisations.
Steel-grade pig iron prices have fallen to a 5-month low, SteelMint’s assessment shows. Prices in Durgapur were assessed at INR 44,300/t exw on 17 June 2022.
SAIL’s recent pig iron auctions also saw a drop in bids. In the auction conducted on 17 June for 10,500 t (basic grade) from Bhilai Steel Plant (BSP), the entire quantity was booked at a weighted average price of INR 43,100/t exw. At the company’s previous auction held on 5 May for 2,000 t of similar grade material, bookings had been concluded at INR 56,400/t exw.
Factors weighing on pig iron prices
- Lower export realisations: Interestingly, demand for pig iron, especially from the USA, turned active in Mar-Apr on growing supply concerns ever since the onset of the Russia-Ukraine war. Indian pig iron producers had concluded some export deals for sizeable volumes to western countries, with the highest share of exports bound for the USA. India increased pig iron exports to 0.21 mnt in May’22 from 0.02 mnt in Jan’22. In a latest development, the Indian government imposed a 15% export duty on pig iron in late-May. This led to producers withdrawing from offering the material in the export market due to unviability.
Meanwhile, a few offers for granulated pig iron were heard in the market as this product does not come under the purview of export duty. 
- Weak finished steel demand: Finished steel demand in the country has been subdued over the past few weeks. Market participants held back purchases in anticipation of further fall in prices. The onset of the monsoon has also dampened demand for steel products.
Prices of blast furnace (BF)-route rebar have come down by around INR 13,000/t m-o-m to INR 59,600/t exy-Mumbai (as on 17 June).
Drop in raw material prices and the imposition of the export duty on steel also weighed on finished steel prices.
- Improved pig iron supply: Due to weak finished steel demand, BF-route steel makers have increased their supply of pig iron in the market. Moreover, pig iron production in the country is strong as a few plants, that underwent maintenance shut down, have resumed operations.
In addition, lower exports have also contributed to increased supply in the domestic market.
- Coking coal prices down: Coking coal prices in India have also been correcting since late-May. As on 22 June, Australia-origin premium HCC prices are at $404/t CNF India, decreasing by 27% m-o-m.
A steep decline in steel prices post-the government’s decision to impose an export duty led to a sharp fall in coking coal demand and its prices.
- Decline in sponge iron, scrap prices
SteelMint’s benchmark sponge P-DRI prices were recorded at INR 31,600/t exw-Raipur, down by INR 1,900/t m-o-m. The steel export duty and low demand weighed on sponge iron prices.
Meanwhile, scrap prices also saw a correction of INR 1,000/t m-o-m. The HMS (80:20) scrap prices stood at INR 37,400/t exy Mumbai on 22 June.
Steep fall in global scrap, pig iron prices
Prices of the substitute products – pig iron and scrap – have also dropped sharply in the last few months.
Global pig iron prices are on a downtrend since April this year. SteelMint’s assessment of pig iron export prices stand at stood $430/t FOB Russia on 18 June, down by over $70/t m-o-m.
Meanwhile, global scrap HMS (80:20) prices have come down by $120/t m-o-m to $343/t CNF Turkey on 22 June.
Outlook
With the onset of the monsoon, finished steel demand will slow down which, in turn, will lower raw material (pig iron, sponge iron and scrap) consumption by steelmakers. Hence, it is likely that pig iron prices will continue to remain under pressure in the near-term, SteelMint notes.
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