Sponge iron prices in Chhattisgarh (central India) have hit a 20-month high. The sharp hike was seen in Raipur due to the prevailing supply shortage & hike in pellet offers. SteelMint’s assessment for P-DRI & C-DRI stands at INR 21,800/t & INR 22,700/t, exw Raipur, respectively.
A few major suppliers stated that P-DRI offers may cross the level of INR 22,000/t exw, Raipur.
The key factors for the expected price rise could be:
Demand-supply imbalance: The majority of furnaces’ owners are paying higher for sponge iron to get prompt deliveries to continue their operations. Hence, the suppliers are charging a premium on delivery conditions. This is the major factor supporting the prices.
On the other hand, since the Chhattisgarh govt has announced a rebate on power tariff, few suspended furnaces have resumed operations, which resulted in improved demand for sponge iron in October.
Curtailed supply- About 3-4 plants are undergoing scheduled maintenance shutdown of their sponge or pellet plants which may affect the spot sales in the coming days. The plants are expected to be back on stream by the second or third week of November.
Also, the majority of Raigarh based plants are not dealing with Raipur based plants due to good demand by local plants and hefty own consumption.
Tight raw material availability- Prevailing shortage of pellets & iron ore, has raised input cost of sponge iron. Hence, the sponge makers are passing the cost to increase their offers and there is no scope for an immediate price reduction in raw materials due to healthy orders in hand & supportive demand. SteelMint’s domestic pellet index has increased by INR 600/t m-o-m and currently stands at INR 9,050/t DAP Raipur.
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