Indian Sponge Manufacturers to Shift Towards Iron Ore Over Costly Pellets
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SteelMint in conversation with major 100-300 TPD standalone sponge iron manufacturers learned that, they are unable to survive due to high cost of pellets and are looking towards Iron ore due to low price amidst premium on produced material.
As per Raipur based manufacturers, they have halted fresh booking for pellets as selling price of Sponge P-DRI it quite low at INR 18,500-18,700/MT, which should be not less than of INR 19,500/MT (ex-plant) depending on the plant capacity.
Further as per them, if the pellet prices remain high and sponge prices will not move up, they are likely to switch P-DRI production and shift towards to make C-DRI which is produced from Iron ore lumps and sold at premium of around INR 1,000/MT in comparison with P-DRI.
Similarly in Durgapur where pellet & P-DRI trade prices are similar to Raipur range, although as the market is nearest to port, the landed cost of imported coal is low by INR 300-400/MT than in Raipur. However the production & selling cost of Sponge P-DRI is similar to Raipur.
The pellet manufacturers in Raipur & Durgapur being confirmed to SteelMint, that there no major deals of above to INR 6,600-6,800/MT. However as they are packed with export orders, they are not looking to cut prices immediately even though the fresh orders are limited.
Outlook - The Sponge iron prices in domestic market should not show further downtrend due to high cost pellets and rising iron ore prices. In addition it is expected that demand may pick in coming days as there is stability in scrap & pig iron prices, which are comparatively trading on higher range than sponge iron.
Tentative production cost of standalone sponge iron plant (100-300 TPD)
| S.no | Particulars | Raipur | Durgapur |
| 1. | Pellet | 7,000 | 7,100 |
| 2. | Taxes (GST @ 5%) | 350 | 355 |
| 3. | Freight Cost | 200 | 200 |
| 4. | Landed Pellet Cost to Sponge Plant | 7,550 | 7,655 |
| 5. | Total Pellet cost (Proportionate of Pellet 1.45) | 10,948 | 11,100 |
| 6. | Coal Cost (RB2) Landed | 7,800 | 7,500 |
| 7. | Total Coal Cost (Proportionate of Coal is 0.9) | 7,020 | 6,750 |
| 8. | Process cost (Factory,Interest,Maintenance,Power) | 1,500 | 1,500 |
| 9. | Sponge Iron production cost (ex-plant) | 19,468 | 19,350 |
| 10. | Selling prices | 18,600 | 18,500 |
| 11. | Margin | -868 | -850 |
Prices in INR/MT
Source: SteelMint Research
