Eastern India Sponge Makers hold Offers on Transport Strike

Transporters strike in Odisha for long time is anticipated to adversely affect central and east India based sponge makers.

Odisha based transporters have been gone for strike since last 6 days on the background of state government’s decision for capping freight charges. As a result, Odisha and Chhattisgarh based sponge makers are currently tussling with lack of raw material. Out of total iron ore production in Odisha, local consumption is 40-45% and 25-30% is supplied to Chhattisgarh and rest to regions like West Bengal and Jharkhand.

Manufacturers in Odisha and Chhattisgarh have no option for change in prices. They have to either keep their offers unchanged or to shutdown their units. This in turn kept sponge iron prices stable in these regions. Whereas, MS ingot/billet prices in the regions have dipped by upto INR 800/MT in a week’s time.

Sponge Makers Already under Pressure

SteelMint in a survey with about 50 medium sized sponge makers located in central and east markets, analyzed that in order to produce pellet sponge, INR 9,000-9,500/MT of conversion spread from raw pellet to P-DRI is required, which is currently INR 8,000-8,500/MT.

City-wise Conversion Spread

Prices basic and ex-works in INR/MT
*loaded to wagons
Source: SteelMint Research

Why Transporters Go for Strike?

The Odisha government has fixed a ceiling charge of INR 5.70-6.00/MT per km of a max on transport rates for domestic movement, which is currently approx INR 9.00-12.00/MT per km. This decision forced transporters for strike. However, if the situation persist for long-term, manufacturers have left with only one option that’s to shutdown their plants till the problem get resolved or to shift local iron pellet buying. Presently, iron pellet prices also remain unchanged.