Sponge iron price up 10% in a month

Trading currently at Rs 12,500 a tonne, steel making raw material has seen a sharp uptick in restocking from steel producers

The price of sponge iron jumped 10% in the past month, on an upsurge in demand from steel mills following the government's protectionist measure to protect the interest of domestic producers.

Trading currently at Rs 12,500 a tonne, the steel making raw material has seen a sharp uptick in restocking from steel producers, amid expectation of a seasonal demand rise from infrastructure and housing activities.

The sudden jump in sponge iron prices indicates a proportionate increase in prices of steel products and, thereby, a revival in the fortunes of steel mills. These have had a setback in the past two years, following a sharp increase in import from China, Japan and South Korea. The government has moved to curb this.

"The prices of competing raw material i.e. melting scrap, has also jumped. The trend is likely to continue, with strong revival in sponge iron prices by the second half of the current financial year," said Amitabh Mudgal, vice-president, Monnet Ispat.

Melting scrap has become costlier by 10% in the past month, to trade currently at $225 a tonne from $180-190. Turkey, not a major buyer in the world market until now, has started buying in large quantities. The traditional supplier of melting scrap, Europe, has diverted shipments to Turkey than export to India.

"The trend is changing rapidly in favour of Indian sponge iron producers, with prices of melting scrap moving up. In fact, a sharp cut in low grade iron ore prices has made sponge iron making viable for independent producers. Despite that, sponge iron units are operating at 40-45% of installed capacity," said an independent producer in Chattisgarh.

Government-owned iron ore miner NMDC announced a 25% cut in prices of low grade ore, a raw material for sponge iron making, a help for producers.