Encouraged by a sudden spurt in demand from the steel and foundry sectors, pig iron producers have raised prices by six to eight per cent for its spot delivery. With this revision, pig iron for steel consumption was quoted at Rs 16,500-18,000 a tonne, while that for the foundry sector at Rs 18,500-20,000 a tonne — a rise of about Rs 1,200-1,500 a tonne.
Experts believe the price rise was needed as pig iron producers are currently operating with very thin margins, with prices of raw materials and finished products having moved up. The per-tonne price of iron ore has risen to $106 from $99 for Chinese port delivery, while coke perked to $246 from $214 in the past month. Each tonne of pig iron production requires 700-800 kg of coke and 1.65 tonnes of ore.
“With the current price, we are just managing our break-even. Since the cost of raw material has increased, we have no option but to pass on high input cost to consumers,” said an executive, on condition of anonymity. Shutting a plant is not an option, as revival would be a herculean task, he added. “Re-starting a shut plant costs several times the loss on the output. Second the gestation period for restarting the plant is more than a fortnight,” said Navin Sinha, a senior executive of Saurashtra Ferrous, a Gujarat-based pig iron producer.
The industry had reduced operational capacity to 50 per cent early this year, due to the uncertain economic scenario. This has since been restored to 70 per cent. Economic recovery is expected to raise demand for steel and, thereby, the raw materials. India’s average GDP growth is estimated to surpass 7 per cent this year, healthy for a country when developed economies are still in a slowdown.
Many large units are suffering because of low export demand. Exporters have shifted to domestic markets for selling pig iron at cheaper prices. According to industry sources, export demand is likely to pick up in the first quarter of the next calendar year, which will probably drive prices further.
Fresh export orders had dried since the start of the current calendar year, with many standalone pig iron producers shutting plants. But, with reduced operating capacity and a revival in demand, the pipeline inventory has cleared.
