Indian Sponge Iron Prices stable on restricted supply of Iron Ore

World’s largest sponge iron producing country, India, with an installed capacity of over 40 MnT, is struggling to operate at optimum level owing to restricted supply of Iron ore.

Sponge Iron prices in Indian market are stable owing to restricted supply of Iron ore from Odisha, the largest Iron ore producing state in the Country. Speaking to several Sponge manufacturers based in Eastern & Central region, SteelMint assessed that with ongoing 50:50 rule in Odisha, which mandate miners to sell or reserve 50% for state based industries and rest 50% to outside state has created an imbalance in Iron ore supply.

Manufacturers claim that Iron ore requirement in Odisha is not so high that 50% of total production has to be reserved for state based industries. On one hand, miners have sufficient stocks at their mines and on the other hand, there are limited permissions for sale of Iron ore to outside state.

Sponge manufacturers also blame that Pellet manufacturers are taking undue advantage of this situation by keeping their Pellet prices high as Pellet is an excisable item and do not come under mining regulations.

[su_quote cite=”said a Sponge iron manufacturer based in West Bengal”]It is tough to source Iron ore from Odisha. To run our plants, we have to depend on Pellets, which is quite expensive.[/su_quote]

Price difference between Sponge iron & Sponge pellet

1. Large availability of Sponge made from Pellet over Sponge made from Iron ore:  After increase production of Sponge pellet in Raipur there is no major changes in Sponge market. Earlier, gap between prices of Sponge Iron and Sponge Pellet are at around INR 900-1,000/MT; now it’s increased by INR 200-300/MT i.e. at around INR 1,200-1,300/MT.There is same situation in Bellary (Karnataka) as gap between Sponge pellet and Sponge iron was at INR 700-800/MT in October, 2013; now it is at INR 1,000/MT.
2. Induction furnaces and EAF units prefer Sponge iron over Sponge pellet: Owing to low prices of Sponge pellet, Ingot/Billet manufacturers are focusing on utilization of Sponge pellet as on priority. This is also a reason behind stabilize prices of Sponge Iron in Central & Eastern India.

Sponge Prices in INR/MT as on 31 Jan, 2014

Basic Prices, Excise duty @12.36%; VAT as applicable.