Sponge iron prices to stay range bound till June

Producers say poor demand and low quality iron ore supplies from key producing regions responsible

Sponge iron producers expect the rates to remain at the current level for at least first quarter of the next fiscal on poor demand and low quality iron ore supplies from key producing regions.

The prices are hovering around Rs 18700 to Rs 20500 at key eastern Indian markets, the largest producing region, based on different iron ore grade. The rates, which were in the Rs19,000-Rs20,000 range in January, are likely to stay at current level till June, producers said.

"I do not see any major demand uptick for sponge iron in near future. The rates are expected to stay at the current level till April-June quarter," said D P Deshpande, managing director of Tata Sponge Iron Ltd.

Sponge iron is deoxidised ore and is used as a feed for crude steel production in electric arc furnaces and at induction furnaces. Though some finished steel producers have raised their rates recently, sponge iron makers said it is unlikely to influence the prices of the steel feedstock.

"I am not sure the recent rise in finished steel prices by some producers is going to influence sponge iron prices as the ore grades we are getting these days are inferior," said R S Kejriwal, owner of Rexon Strips, a sponge iron maker at main hub Rourkela.

Many large miners in Odisha have already reached their production limit prescribed by the state government for the current fiscal. Hence, the sponge iron producers are supplied with old stacked raw material often filled with lot of impurities, he said.

For the current fiscal, the Odisha government has fixed 57 million tonne as capping limit for iron ore production, excluding mineral production by steel producers with captive mines. By end of January, total production in the state was above 57 million tonne, including captive productions.

The sponge iron rates are likely to remain in a tight range also because of fall in pellet prices, producers said. Iron ore pellet prices have witnessed price drop of around Rs 500 per tonne to trade at Rs 6000, following weak spot prices in global markets amid slapping of export duty by the Union government. The exports of the raw material have declined sharply in Fabruary and March following the duty imposition.

The drop in demand for sponge iron and pellet prices has led to cut in iron ore prices by miners. At major market Barbil today, Rungta Mines cut the prices by around Rs 200 per tonne to Rs 6600 per tonne for 62 grade iron ore lumps. However, there was no changes in fines rates.