Sponge iron companies raise prices by 3-5%

After steel producers raised prices by Rs 1,000-1,500 a tonne, sponge iron companies have increased prices by three-five per cent or Rs 500-800 a tonne, effective from September 1.

Sponge iron in India’s major hub, Raipur, is being sold between Rs 17,500-17,800 a tonne while the same is quoted at Rs 17,000 a tonne in Delhi. Prices of this steelmaking raw material have already risen from the lows of Rs 16,000 a tonne about a month ago.

“The positive sentiment is driving prices and not demand. The real demand is yet to pick up since post-monsoon construction activity has not yet started. Two months of the second quarter have already passed while the global economic outlook still remains uncertain. But, future demand is expected to emerge for real consumption in the third quarter of the current financial which is considered generally, as a very good period for the Indian steel industry,” said Vimal Somani, director with Topworth Group, a sponge iron producer.

Pipeline inventory, which almost emptied during the monsoon season, has gradually started to rise. Steel producers have started re-stocking raw materials. Therefore, the sentiment has turned positive.

“We do not see any upsurge in domestic steel demand as of now as the monsoon still continues throughout the country. Although the actual scenario will be clearer by the end of September, domestic steel mills have started booking raw materials, which has been driving sponge iron prices for almost one month,” said Amitabh Mudgal, vice-president (marketing and corporate affairs), Monnet Ispat, a major producer.

Other raw materials including iron ore and coke prices have also started firming up. Indian iron ore exporters have started quoting $150-152 a tonne on a spot basis to Chinese buyers. Surprisingly, Standard Chartered has forecast the steelmaking raw material will jump to $200 a tonne as suppliers struggle to meet the increasing demand after the 2008 global credit crunch halted or delayed major mining projects.

Spot iron ore prices declined 15 per cent to $140 last month from $165 a tonne nearly a month ago. Similarly, coke price plunged 8.70 per cent to $210 a tonne from $230 a tonne .

Further, tight supply due to lower exports from India and rising demand from top consumer China could push iron ore prices higher in 2011 after an expected decline in the fourth quarter of this year.