Nepalese mills activate sponge iron buying before budget announcements

Nepalese mills have witnessed a significant increase in buying activities as they anticipate potential changes in the duty structure ahead of budget announcements.

Recent statistics

In April 2023, sponge iron imports stood at approximately 70,045 t, almost double of the 31,063 t recorded in April 2022, reveals SteelMint data. It happened mainly with the increase in Nepal's melting capacity. It is to be noted here that almost the entire sponge volume is supplied by India.

Sales to Nepal spurted by over 83% to 0.64 mnt in FY23 from 0.35 mnt in FY22, boosting overall exports.

Additionally, reports indicate that in the past few weeks of May 2023, around 27,000 t of CDRI exports from eastern India to Nepal were recorded at prices ranging from $400-407/t on CPT Raxaul.

Nepal, in a bid to expand its feed base, is also importing an estimated 20,000 t of ferrous scrap per annum.

Recent sentiments:

As per sources based in Nepal, this surge in buying is in response to the nominal duty rates of 1% on sponge iron imports and 0% on scrap imports, which have resulted in substantial revenue losses for the government. Furthermore, the nullification of an excise duty on finished products for all TMT manufacturers has created an imbalance in the market. These factors have fuelled speculation and led to a rise in sponge iron imports, despite a sluggish domestic market in Nepal.

In addition, the government is considering reversing the exemption of excise duty on finished products and extending it to all manufacturers. Moreover, duty rates may be adjusted in the upcoming budget to promote fairness and equal opportunities among manufacturers and importers.

Domestic rebar offers dropped by NPR 1,000-2,000/t ($8-15) w-o-w following fall in Indian imported offers of billets. Currently offers heard are at approximately NPR 91,000-93,000/t.