Sponge iron prices slip 10 per cent in a month

Prices of sponge iron have come down by 10 per cent in the last one month on falling demand from steel manufacturers. The steel-making raw material is currently quoted at Rs 13,500 per tonne compared to Rs 15,000 a month ago.

This development assumes significance as the industry had seen a revival in prices in February. Prices have jumped by 8-10 per cent in February, from a low of Rs 12,500-13,000 in January.

The sponge iron demand was likely to remain under pressure at least till June-end, because of a combination of factors such as the general elections and a sluggish trend in manufacturing activities, said Amitabh Mudgal, vice-president (marketing & corporate affairs), Monnet Ispat.
 

Year	Production (million tonnes)
	Total	Gas-based	Coal-based
2004-’05	10.13	4.64	5.49
2005-’06	11.82	4.54	7.28
2006-’07	16.27	5.26	11.01
2007-’08	19.99	5.85	14.1
2008-’09 (estimated)	21.00	7.00	14.00

A huge quantity of steel billets was being imported from Kazakhstan and Russia till early this year, when the raw material for manufacturing flats and longs in the Indian market was quoted higher than the prevailing global prices. Since then billet prices in the country have come down to Rs 32,000 per tonne, resulting in a decline in imports, said Anil Suraj, a steel analyst from Mandi Gobindgarh.

The prices of billets have moved marginally up by Rs 300-500 per tonne in the last one month, thereby reducing the parity between imports and locally-produced commodity. Demand continued to remain sluggish which was expected to stretch for another three months, said Suraj. Billets in the international markets is quoted at $397 per tonne.

Surprisingly, iron ore has not yet responded similarly, said Mudgal. Lumpy grade iron ore for exports continues to move in the range of $55-60 per tonne while the same for local markets is sold at Rs 2600 per tonne.

Surprisingly, iron ore has not yet responded similarly, said Mudgal. Lumpy grade iron ore for exports continues to move in the range of $55-60 per tonne while the same for local markets is sold at Rs 2600 per tonne.

Meanwhile, sponge iron output is likely to increase this fiscal approximately by five per cent on the spectacular growth of the sponge iron industry especially in the mineral rich regions of Orissa, Jharkhand, Chattisgarh, West Bengal, Karnataka.

Such a growth has been favoured by a host of factors like growth in domestic steel demand in the recent past, a vigorous growth in domestic steel production led by the secondary steel making sector, techno-economics like relative low cost of investment, ease of setting up of a sponge iron plant, clear-cut technology of direct reduction, better quality in end-product, availability of mineral resources, cheap labour as well as professional / technical expertise and frequent problems of scrap (affordability and availability), said an analyst.