Sponge Iron Prices in Central India Hit 10 years High

Indian Sponge iron prices have increased sharply. As per SteelMint data the prices is hovering at all time high but as per market participants these levels were seen in 2008, making it nearly 10 yrs high in Central India - Raipur. The latest offers for Sponge P-DRI in Raipur reported at around INR 24,500-24,700/MT, which is the highest ever, as per data maintained by SteelMint.

Industry experts believed the reason behind the spurt in prices are strong pellet exports & rising iron ore prices. Meanwhile, seasonal low production of sponge iron also marked to be the key factor for high prices.

There are about 5-6 Integrated plants in Raipur who's average merchant sale of sponge P-DRI in the merchant market was more than 500 MT per day. However as the plants are booked with bulk pellet export orders, they have limited Sponge production resulting in thin supply in merchant market. This has strengthened prices to 10 years high.

What are the key factors that have supported the price hike ?

1. Less availability of pellets in merchant market on export bookings - Few major pellet makers in Central India like Godawari Power & Ispat and Bajrang Ispat are not offering pellets in the domestic market owing to sufficient export bookings and are expected to offers in limited quantities in merchant market for upcoming two months. The supply constraints by major pellet makers has brought material scarcity in domestic market supporting further price rise. Around 0.2 MnT pellet bookings was heard to be made by central India based pellet makers this month.

Central India based mills might look up to other states like Odisha for sourcing iron ore, however monsoon and rake availability remains a concern.

2. Limited iron ore availability- Amid monsoons, iron ore production has come down. NMDC iron ore production for the month of July'18 recorded at 1.52 MnT, down 35% M-o-M against 2.34 MnT in June'18. Out of the total material produced in July'18, 0.72 MnT (47% of total production) stood from Bailadila mines, down 57% M-o-M. Similarly in Odisha, production has lowered over monsoon.

3. Recent iron ore price hike - NMDC has increased Baila lump & fines prices by INR 150/MT recently from its Bailadila mines. Odisha based major merchant miners have raised prices by INR 300/MT in both lump & fines in last couple of days.