Indian sponge iron prices less likely to fall further - SteelMint Analysis

After hitting over 3 years low, the domestic sponge iron prices rebounded yesterday by INR 200-500/t in major locations on account of improved demand and rally in billet prices.

As per SteelMint analysis, sponge prices are less likely to fall drastically looking at high production cost versus prevailing offers of sponge.

The margins (conversion spread) from raw pellet to sponge P-DRI remained low in major markets like - Raipur & Bellary for standalone manufacturers. SteelMint in data analysed that standalone sponge plants are experiencing a gap of around INR 1,500-2,000/t between production cost & selling prices of P-DRI in the domestic market.

The current offer of P-DRI is hovering at INR 15,500-15,700/t, which should be not less than INR 16,500/t EXW. Lower demand than the supply has somehow pressurized prices, one of the major merchant suppliers in Raipur stated.

It seems prices should not be under pressure in coming days as production utilization is low during monsoon, he added.

Further in southern India, a Bellary based sponge manufacturer quoted, "We are unable to run units with current cost of production versus lower selling prices."

Also, similar comments were received from West Bengal & Odisha based sponge manufacturers. So, it seems the producers may push prices higher and if prices come under pressure they may go for production cut to match demand-supply to keep prices supported.