Sponge iron price jumps 10% in one month

Price trend indicates a revival in demand from steel mills after the government took steps to protect domestic firms

Sponge iron price jumped up 10% in the last one month on the back of 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 expectations in seasonal demand from infrastructure and housing activities.
 
The sudden jump indicates a proportionate increase in prices of steel products in global as well as domestic markets and thereby, a revival in the fortunes of steel mills.
 

Indian steel mills had suffered a major setback in the two years following a sharp increase in dumping from China, Japan and South Korea.

 
However, measures taken by the government to curb cheap import from the aforementioned three origins are set to reduce dumping into India. Thus, the demand of steel making raw material is expected to increase by the second half of the current financial year.
 
“Sponge iron demand has increased in the last one month on restocking from steel mills. The prices of competing raw material i.e. melting scrap, has also jumped similarly. The trend is likely to continue in future as well with strong revival in sponge iron prices by the second half of the current financial year,” said Amitabh Mudgal, Vice President, Monnet Ispat.

 
Meanwhile, melting scrap has also become costlier by 10% in the last one month to trade currently at $225 a tonne from the level of $180-190 about a month ago as Turkey, which was not a major buyer in the world market until now, has started buying in large quantity.
 
The traditional supplier of melting scrap, i.e. Europe has diverted shipments to Turkey than exporting to Indian importers. India’s melting scrap import has witnessed a highest ever at around 15 million tonnes in the financial year 2015-16, a rise of over 40% from the previous year.
 
The sharp increase in import of melting scrap, a substitute, has resulted into lower demand of sponge iron from India resulting into price crash in the last two years from the level of around Rs 18,000 – 19,000 per tonne in 2014.

 
“But, now the trend is changing rapidly in favour of Indian sponge iron producers with prices of melting scrap started moving up. In fact, a sharp cut in low grade iron ore price has made sponge iron making viable for independent producers. Despite that, sponge iron units are operating with a 40-45% of its installed capacity,” said an independent producer in Chhattisgarh.
 
The government-owned iron ore miner NMDC announced 25-20% cut in the prices of low grade iron ore, a raw material for sponge iron making, which provided breather for its producers.