Sponge iron prices in Indian spot market noticed correction upto INR 500/MT owing to weak demand in finished steel. It is anticipated that there will be improvement in supply of Iron ore. Current offers are in the range of INR 21,000-23,000/MT on Ex-Works basis for 79-80 FeM.
Prices, which shot up sharply after the Supreme Court’s order on mining ban in Odisha, has seemed to stabilizing down on low demand. Government is in the process of renewing Iron ore mining for captive miners (Tata Steel and SAIL) and in talks of liquidating stocks of closed mines.
Less Probability for Price hike in Sponge Iron
Despite Iron ore and Pellet prices on fire, Sponge iron offers do not witness any uptrend in coming weeks. Market participants believe that people have already factored Odisha mining ban and there is less scope of price rise.
In a survey conducted by SteelMint from 50 small & medium Sponge iron plants, having a capacity of 100-300 MT per day across India, few important points were noticed.
Why there is limited Scope of Price rise?
- Most of Sponge manufacturers have Iron ore/Pellet stock for 20 days, which were bought before any price hike
- Not many Sponge manufacturers are willing to take Iron ore/Pellet at higher prices
- With monsoons hitting next month, finish demand is bound to come down, which will impact Sponge demand as well
- Electricity prices are expected to go up in few major states, which will increase the production cost that build pressure on Sponge iron prices
- Imported Scrap offers are still competitive and appreciating INR gives a chance for cheaper imports
- Odisha government expected to allow liquidation of stock from closed mines. Orissa Mining Corporation (OMC) has an inventory of 2.6 MnT
- Imported Iron ore vessels expected to come in the month of June, which will give some relief to steel makers
Why Sponge Iron Prices will not fall sharply?
- Mining ban in Odisha, which will impact 19 MnT of Iron ore on annual basis, will restrict Iron ore supply
- 50:50 rule in Odisha will continue to restrict supply of Iron ore to other states.
- Sponge iron prices may correct by bits & pieces as volumes have been decent at these levels
- Serajuddin mines had to cut its production to its original environmental clearance limit (which is 4.5 MnT). Till Mar’14, it was operating at 15.5 MnT
Leave a Reply