Indian sponge iron prices rallied in July as demand from the end users gradually increased, while input cost for sponge makers, mainly iron ore increased considerably.
Steel makers across India were keen to increase their production ahead of monsoon and recover the backlog caused by the pandemic. Mills for the last few days focused on stocking raw material amid shortage of scrap in the local market.
Ferrous scrap prices rose considerably due to shortage and a jump in global markets with Turkish mills resorting to trades at higher prices. However, mills tried to save their margin by utilizing sponge iron more over scrap due to its easy availability.
The Davis Index for sponge iron in Durgapur rose by 16.8pc to Rs18,000/mt del mills in July. Sponge iron manufacturers are facing shortage of raw material due to heavy monsoon in the eastern part of India. New merchants of mines and steel mills are raising concerns on huge royalty price — an anomaly in calculation by the Indian Bureau of Mines (IBM).
Pellet sponge iron prices in Raipur rose by 14pc to Rs17,750/mt in the month of July as the region is one of the major consumers of sponge iron for its steel making.
June was tough for steelmakers as rising COVID-19 cases and shortage of labours slowed down the overall production activity. Sponge iron prices started its downward trend from the Rs16,000/mt levels and bottomed out at Rs15,000/mt del Raipur. In Durgapur, sponge iron prices declined from Rs17500/mt and touched a low of Rs14,800/mt in June 2020.
Sponge iron July-end prices are again back to June levels but market participants believe prices would sustain longer at the current levels on account of tight supply of raw material and low production in monsoon.