Indian Sponge Iron Prices find Support on Expensive Scrap

High scrap offers in global market have lent support to Indian sponge iron prices, which have also gone up to  INR 600/MT in last few weeks

Rising ferrous scrap offers from US, Europe and Middle East suppliers, Indian sponge manufacturers have raised their offers in past few weeks in similar lines. Currently sponge iron is being offered in the range of INR 18,500-20,500/MT (US$ 295-330) on ex-works basis.

India is the largest sponge iron (DRI) producer with an annual production of around 19-20 million tonnes per annum and third largest scrap importer in the world (imported over 7 million tonnes in 2012-2013).

Due to restricted supply of iron ore in the country, sponge iron units are operating at less than 50 percent capacity, forcing steel makers to go for import of scrap/DRI/HBI. Now with depreciated Indian Rupee and high offers in global market, Indian steel makers have not much of option but to rely on domestic supply of sponge iron and scrap.

Market participants highlight that rising scrap prices in global market, Indian imports of scrap to fall further in coming weeks, which is already down by 30-35% over previous year. Indian scrap imports which had hit an all time high of 7.5 MnT in 2012-2013 have seen a drastic fall over depreciated currency and recent duty of 2.5% imposed on imports of scrap.

“Domestic scrap prices have gone up by almost INR 700-1,000/MT in last few weeks, for the only reason landed cost of imported scrap is much higher and with volatility in Rupee, not many steel makers and importers are willing to take risk. More over offers from US and European suppliers are much higher than Middle East suppliers.” said a scrap importer based in Mumbai.

Current offers for HMS scrap from Middle East is at around US$ 350-355/MT CFR India and HMS scrap from Europe and US are in the range of US$367-375/MT CFR India, he further added.

All prices are basic and delivered to plant basis. 1 USD =INR 62.5

On the other hand sponge iron manufacturers claim that restricted supply of iron ore from Odisha and rising export of iron pellet from India will support sponge iron prices.

3-Months Sponge Iron Prices in Raipur (Basic Prices in INR/MT)