Steelmakers worried at sponge iron price slump

Steel producers are worried over declining sponge iron prices. In the domestic market, sponge iron price has declined by 25 per cent from Rs 11,000 per tonne to Rs 8,200 per tonne in the last one month.

Mini sponge iron producers are having tough time because of high input cost and low realisation. Input cost for sponge iron production has gone up by 25 per cent with an absolute rise in iron ore prices by 19 per cent in exports as well as domestic market. Chinese price negotiation has checked the realisation of iron ore mine to just 19 per cent against their high expectations of 25 per cent.

"We could have achieved our target increase of 25 per cent but China's "go slow" attitude and Brazil's "negotiation in hurry" forced us to compromise at just 19 per cent more realisation," a local exporter said.

On the other hand, trade scenes in the domestic markets for building materials are contrasting. Prices of long products are weakening due to lowering demand in the domestic one while cement demand is strengthening due to rising demand. The demand for longs has not yet picked up fully as the construction activities in the country has slowed down due to lack of funds. Therefore, sponge iron price has dwindled in the market.

The mini sponge iron producers especially in Chhatisgarh today is exhausting their inventories. Once these inventories are cleared, expected in 15 days, the industry would face supply crunch and thereby, the price would go up, a trader said.

Surprisingly, steel scrap, another raw material for steel making is fetching good prices in the international market at $295 per tonne.

Steel producers of the country are facing double blues with load shedding in some areas in the north and lower realisation on the other like Chhattisgarh.

North India-based steel producers may loose accumulatively Rs 1 crore everyday due to load shedding in industrial area. The Punjab government had recently reached an agreement with the local induction furnaces and re-rolling mills to streamline power cut of 24 hours from 8 am to 8 am on different days in different locality.

"The re-rolling mills and induction furnaces owners would heave a sigh of relief with the government decision as the frequent and unscheduled power cuts had created huge business losses for us," Anil Suraj, an owner of a rolling mill said.

There are approximately 19 induction furnaces and 320 re-rolling mills in the vicinity of Mandi Gobindgarh which produces approximately 12,000 metric tonnes of steel per day and set the benchmark prices of steel and scrap for the entire country.