India: Record-high coal prices push sponge iron prices higher in March

Indian sponge iron (PDRI and CDRI) prices saw a sharp hike m-o-m across key markets in Mar'22.

In the beginning of the month, prices breached all-time high levels since 2010, the period from which SteelMint started maintaining its data. However, subsequently, prices edged down following a decline in coal prices.

Prices across markets

• Raipur: Pellet-based sponge iron (PDRI) prices increased by INR 6,100/t m-o-m to INR 40,900/t on exw basis in March. Around 79,500 t of PDRI deals were recorded by SteelMint last month.
  
  

Iron ore-based sponge iron (CDRI) prices stood at INR 42,200/t exw Raipur, up INR 5,470/t m-o-m.

• Bellary: PDRI prices rose by INR 5,400/t m-o-m to INR 41,200/t exw. Around 40,320 t of deals were recorded in March.
  
  

CDRI prices were assessed at INR 41,200/t exw, higher by INR 5,400/t compared to February. SteelMint recorded 41,860 t of CDRI deals last month.

• Rourkela: Sponge CDRI prices in this region stood at INR 39,670/t, up INR 5,240/t m-o-m in March. About 41,065 t of deals were recorded by SteelMint last month.
  
  

Factors keeping sponge iron prices high

• Record-high coal prices: Thermal coal prices in India were on an upswing till mid-March. As per CoalMint's assessment, portside RB2 (5500 kcal/kg NAR) coal prices rose by INR 5,490/t m-o-m to INR 21,480/t in March.
  
  
• Strong pellet prices: Domestic pellet prices increased across key markets as major players raised offers on the back of a recovery in exports amidst higher global prices and recovery in domestic demand. The weighted average prices recorded as part of SteelMint's pellet index, PELLEX, was assessed at INR 13,810/t in March, up INR 1,390/t m-o-m.
  
  
• Higher melting scrap prices: Domestic melting scrap prices trended higher in the first two weeks of March on improved semi-finished steel sales. SteelMint's domestic steel scrap index rose by INR 5,390 m-o-m to INR 50,030/t exw Mandi Gobindgarh.
  
  

Outlook

Sponge iron prices are largely governed by coal price trends. As coal prices softened since mid-March, domestic sponge iron prices have edged lower. Moreover, sponge iron production in the country generally remains strong during the summer months, i.e. from April-June. Hence, prices may remain under pressure in the short-term as demand from IF-route billet makers would remain low due to power shortage, SteelMint understands.