Indian Sponge Iron Prices Less Likely to Fall Further – Manufacturers

Indian Sponge iron prices are likely to remain steady or find support at current price levels.

In conversation with several industry experts, SteelMint analysed that the Indian sponge iron prices expected to remain strong due to seasonal impacts and high cost raw materials. Meanwhile below are the key factors which are added by them.

Iron ore/pellet prices remain supported amid strong export demand: Iron ore & Pellet are the key raw material for making sponge iron and the prices of both raw materials have remained supported due to rising export demand and as per assessment the pellet prices continued strong and surged by INR 100-300/MT in eastern region, while in central region the plants are holding sales.

Last week central India based – Godawari Power & Ispat concluded pellet export deal to China for 50,000 MT iron ore pellets (Fe 64%, less than 2% Al) at around USD 133-134/MT, CFR China (equivalent to USD 123-124/MT, FoB India). Jindal Steel & Power from Eastern region has also concluded export deal for regular grade pellets (Fe 64%, containing 3% alumina) at USD 130-131/MT, CFR China.

Seasonal effects, decent bookings in last offers are expected to keep iron ore & pellet prices supported in domestic market.

Seasonal impact on production- In general with the monsoon arrival, sponge iron output is less with the mills, which may directly impact on supply and offers may turn strong in most of locations.

Plant maintenance & shut down- Manufacturers in major regions are planning to put plant under regular maintenance rather than selling material below to par value, this may create short supply in merchant market. However as per conversation few of standalone plants have already curtailed production because they are unable to sell material at current low offers.

Costlier substitutes- Scrap & Pig iron are the key substitutes of sponge iron and the prices of respected products remain high, than the sponge iron. On an average there should be a price gap of INR 3,000/MT between Sponge iron & Scrap/Pig iron, however it is currently more than of INR 4,000/MT compared with landed cost of respective products. Hence there are assumptions with improved buying interest of sponge iron, prices should strong.

As per daily assessment, the latest offers for Sponge P-DRI is hovering at INR 16,300-16,500/MT ex-Raipur, INR 15,700-15,900/MT ex-Raigarh – Central India, INR 16,800-17,000/MT in Durgapur – East India & INR 16,700-16,900/MT ex-Bellary – Southern India, excluding of 18% GST.

Tentative Production Cost of Sponge P-DRI in Central India (Standalone Plant)

Cost excluding interest
Source: SteelMint Research