Indian sponge iron prices plunge to three-year low on improved supply

Sponge iron prices assessed by SteelMint have fallen to a three-year low on the back of ample supply and sluggish demand.

Sponge P-DRI prices in Raipur have fallen by INR 1,000 ($14)/t over the week to INR 14,800-15,000/t, while prices in Bellary fell by INR 500-700/t to INR 14,800-900/t; EXW. Prices in other markets have also fallen by INR 400-600/t, said market participants.

Sponge manufacturers in Raipur are operating at a capacity utilization rate of 80-90% compared with a 65-70% rate of capacity use of induction furnace-based mills in the city, resulting in a glut of sponge iron. Additional sponge iron ore supplies are coming in from other states into Chhattisgarh too.

Producers in Karnataka's Bellary region are reporting limited demand from Maharashtra (Wada) and Tamil Nadu-based buyers where induction furnaces are operating at average of 50% of capacity as operations have been affected by labour shortages. Sponge iron producers have reduced prices to promote sales in Bellary.

Sponge iron prices are expected to be stable in the near-term as monsoon rains disrupt iron ore supplies to plants, affecting production rates. But with the Covid19 infection spread continuing to intensify in key industrial states such as Maharashtra and Tamil Nadu, demand from end-users are unlikely to recover, which would limit sponge iron price gains.