Sponge iron prices up 5% in two days

Sponge iron producers have raised basic selling prices of their products by 5.25 per cent in the last two days on apprehensions that the ongoing raids to stop illegal iron ore mining across the country may create scarcity of the raw material in the short term.

With the current upward revision, high quality of sponge iron was quoted at Rs 14,200 a tonne while the mid and low grade steel-making raw material was sold at Rs 13,700-14,000 a tonne.

Producers, however, consider the current trend a “blessing in disguise” as after several months of poor demand there is a revival in steel and thereby, sponge iron industry is in sight. Sponge iron producers are looking for an opportunity to raise their products’ selling prices further to cash in on the anticipated rise in demand.

“The industry was operating with virtually ‘zero’ margin and working just to honour the commitments. Profit margins had bottomed out due to high iron ore prices and low demand from steel industry,” said Amitabh Mudgal, vice president (Marketing and Corporate Affairs) of Monnet Ispat, one of the largest players in the industry.

With revival in the construction sector, it is likely to see a huge investment in the coming months. Pending projects are likely to get second round of funding by December-end.

Also steel scrap, another raw material for steelmaking, was selling at $340 a tonne as against $290-315 a tonne a month ago. As a result, billet and re-bar producers raised prices in tandem to sell their produce at Rs 23,000 a tonne and Rs 26,700 a tonne, respectively.

Meanwhile, R K Sharma, Secretary General of the Federation of Indian Minerals Industries (FIMI), the apex mining trade body, said the closure of 56 mines (50 in Orissa and 6 in Andhra Pradesh) is unlikely to result in scarcity of iron ore in the country. Rival iron ore producers always take advantage of closures of mines and they raise production. Hence, there would no shortage of iron ore in the country, Sharma said.

According to sources, the government suspended mining activity in 128 mines and cancelled 482 trading licences in Orissa for acts of irregularities following vigilance raids.

The government is also cracking down companies and traders, engaged in illegal mining in Goa. Goa, Andhra Pradesh and Orissa, the major ore producing states in the country, together contribute 50 per cent of exports.