Indian Sponge Iron Market Hit a Record Low in The Last Quarter of 2022, Will It Rebound in 2023?
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The price of sponge iron, also called DRI (Direct Reduced Iron), fell sharply in the last quarter of 2022, specifically in November.
In terms of price movements, the quarter started on a firm note, as the prevailing offers in October were slightly lower compared to September. However, with sluggish trends, the price fell by 3-5% month-on-month in the first half of November. Later, with the removal of export duties, the price rose sharply by 4-6% in December and ended on a positive note.
Factors that pushed prices to record lows:
- Dull exports of raw materials (pellets and iron ore) and weaker domestic demand resulted in a decline in raw material offers during the first half of November 2022.
- At the same time, the prices of imported scrap, the product that replaces sponge iron, also reached a record low in November 2022.
- Nil exports of pig iron kept prices low for melting commodities, including sponge iron.
- Bulk scrap imports in during the quarter turned India into the second largest scrap importer in the world during 2022.
Sponge iron’s share in India’s steel production:
- About 30% of the steel produced in India is made from the melt of sponge iron, which has a significant impact on the price movement of the Indian steel market.
- In India, around 90-95% of sponge iron is produced through coal, while the remainder is produced through gasification.
Will it rebound in 2023?
Based on the anticipated high demand in the domestic market during the first quarter of CY 2023, market participants are optimistic about the price movement of steel goods. The restart of exports after a long hiatus, and the absence of export taxes on a number of steel products and raw materials are further major drivers of optimism.
Therefore, the Indian sponge iron industry is anticipated to benefit from this favorable outlook for steel in terms of price, margins, and demand on the spot market.
Also Read:- How Was The India’s Steel Sector Perform In 2022?
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