Sponge iron prices in Indian market have been volatile over last few weeks on falling steel prices in domestic market and rising imports of ferrous scrap. After speaking to industry participants, SteelMint assessed that sponge iron prices should stabilize at current levels of Rs 17,500-19,500/t. Major reasons why prices should find support
1. Falling Rupee– Rupee is a major factor which controls import of ferrous scrap, since Rupee has hit all time low of 57.72/USD, most of importers are unwilling to book cargoes and it is expected that imports will fall drastically in coming weeks, forcing steel mills to depend on sponge iron and domestic scrap.
2. Iron Ore– Iron ore prices in domestic market has been kept unchanged by big miners like Rungta, Essel and NMDC. Sponge manufacturers have no other option but to source ore at these prices, which will restrict them to cut their prices.
3. Coal– Coal has been a issue for sponge manufacturers, according to industry sources, plants which are based on coal from Coal India Ltd, have not been able to get committed quantity due to lower production of coal and manufacturers are bound to buy coal from e-auction or traders at a higher price.
4. Monsoons– Upcoming monsoons (June- Sep) in India will hamper production of iron ore and coal, another major reason why sponge prices should hold firm.
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