Domestic sponge makers are distressed over stable iron ore prices for Aug’15. They may curb production in order to sustain in domestic market.
Sponge makers in Indian market have been under pressure since past few months due to subdued demand and weak global sentiments. To add on, two major iron ore miners namely NMDC and Rungta have recently opened their offers with no corrections for Aug’15 deliveries. This in turn has disappointed domestic sponge producers. Prices in a month’s time have slumped by around INR 1,900/MT across major markets owing to dwindling demand from finished market.
NMDC and Rungta contribute 30-35% of total iron ore production. Both these miners have kept prices unchanged, however, sponge makers were expecting a minimum price cut of INR 300-500/MT in order to continue operations in their units.
Sponge makers may curb production
Viewing the overall scenario, SteelMint analyzed that central and east India sponge makers may either have to curb their production amidst high production cut by induction and rolling mill operators or shift to iron pellet. Moreover, Odisha based units are likely to purchase raw material either from OMC mines (Odisha) or from small private miners in order to reduce their production cost.
Last week, sponge makers held their offers with an expectation of price correction in iron ore. C-DRI price movement in major markets – Durgapur at INR 14,400/MT (- 250; 78 FeM), Raipur at INR 14,750/MT (- 50; 80 FeM), Rourkela at INR 13,400/MT (- 50; 78 FeM), Bellary at INR 13,900/MT (- 400; 78 FeM) and Hyderabad INR 16,400/MT (- 100; 82 FeM). Meanwhile, P-DRI prices are assessed in the range of INR 12,300-14,100/MT.
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