Sponge iron firms hike rates

Sponge iron producers increased prices by 3 per cent or Rs 400 on Monday to Rs 14,200 a tonne following a shortage of raw materials and a rising demand from domestic steel mills. This is the second price hike within a fortnight.

In the first increase in the first week of September, domestic sponge iron manufacturers raised prices by Rs 300 a tonne as a result of a scarcity in raw materials.

"Supply is very tight as sponge iron producers are utilising only 70-80 per cent of the capacity on non-availability of iron ore, the only raw material," said Amitabh Mudgal, general manager, marketing and corporate affairs, Monnet Ispat. The demand for sponge iron also rose because of a tight supply of shredded scrap, another raw material for steel-making, added Mudgal.

Prices of shredded scrap have also surged by at least $25 in the last fortnight to $375 a tonne. Stiff norms for scrap import from war-torn countries and a surge in global demand for the raw material have led to a substantial drop in scrap imports in the recent past, fuelling a rise in prices.

An industry source added that iron ore stocks at mines were lying in abundance, but admitted that problems in transporting them had caused a scarcity in the mineral.

"There are no rakes available. Roads are so congested that even two-wheelers and bicycles cannot move on roads leading to city highways and ports. Though the mining activity is not subdued, supplies have been affected badly because of transportation," he added.

In Goa alone, at least 40 tonnes of piled-up iron ore is waiting to be transported to end users.

Prices of iron ore too are moving up on high transportation cost, duty on exports and the rupee appreciation. In the last one month, prices of iron ore fines have almost doubled from $60-70 to $100-110 a tonne. In the last fortnight, the transportation cost has gone up by Rs 200 a tonne in the domestic market.

Prices did not seem to fall in the near future. However, decisions by global mining giants, including BHP Billiton, CVRD and Rio Tinto, could change the market dynamics overnight, said an industry expert.