Sponge iron prices jump 24% since March 1

In spite of its prices falling 9 per cent in the last fortnight, sponge iron, an important raw material for making steel, rates have jumped 24 per cent since March 1.

Sponge iron, or direct reduced iron (DRI), prices are moving in line with other steel inputs that have gone substantially up in the last one month.

After hitting the all-time high of Rs 23,000 a tonne in the third week of March, DRI, the only substitute to steel scrap as a raw material, prices are moving in the range of Rs 21,000-21,500 a tonne, thanks to government intervention.

"Prices of other raw materials have also rose abnormally," said Amitabh Mudgal, general manager (marketing), Monnet Ispat, one of the largest sponge iron suppliers to steel producers.

Pig iron rose to Rs 30,000 a tonne last month and is currently quoted at Rs 27,000-28,000 a tonne. Steel scrap is not available even at double the price at $600 a tonne. Coking coal has perked up to $300 from $130 a tonne in three to four months while coke has doubled to $600 a tonne since the beginning of the year.

India produces about 50 million tonnes of steel anually while the consumption is about 51 million tonnes. When asked about the fall in contracted value of iron ore between Indian exporters and Chinese importers from $175-180 a tonne last November to $140-145 a tonne at present, Amitabh said that the real implication on domestic buyers remained untouched.

Chinese traders slow down orders when prices start moving up. As a consequence, the pressure of stock clearance forces exporters to bring down prices. "Hence, the Chinese contracted price cannot be a correct indicator for real market sentiment," said Mudgal.