Margins Remain Strong With Indian Sponge Iron Manufacturers Despite Price Corrections

Margins remain strong with Indian Sponge Iron manufacturers despite a sharp price correction over the last few weeks, according to information obtained by Ofbusiness from the manufacturers. Considering the current price of Iron Ore Pellets and Coal, Sponge Iron producers are still having enough margins.

The current price of Iron Ore Pellets (Fe 63%) in major Indian markets is reported at around Rs. 8,500-9,000/ton, while the cost of Non-Coking Coal for making a ton of Sponge Iron is reported to be nearly Rs. 10,000

According to producers, they require about 1.5 tons of Iron Ore Pellets for making a ton of Sponge Iron. Hence, the cost of Pellets is about Rs. 13,000-13,500/ton and the Coal cost is about Rs. 9,000-10,000/ton. Additionally, there is another miscellaneous cost reported between Rs. 2,000-3,000/ton. Therefore, considering these calculations, the Sponge Iron prices should be around Rs. 25,000-26,000/ton ex-works, while the current price in the domestic market is reported to be around Rs 28,000-29,000/ton on an ex-works basis.

Why It Happened?

• Tumble Coal Prices: Coal is a key fuel for making Sponge Iron. The prices of imported Coal dropped by nearly $55-60/ton (equivalent to Rs. 4,500-4,900/ton) in 2023. Also, during this period, domestic prices of Coal declined in the same proportion, roughly by Rs. 4,000-5,000/ton.

• Declined Pellet Prices: For making a ton of Sponge Iron (Pellet-based Sponge Iron), about 1.5 tons of Iron Ore Pellets is required, which also vary according to grades. Thus, the input cost of Sponge Iron is also driven by the Pellets, and the prices of these raw materials declined by nearly Rs. 2,000/ton in 2023.

• Considering the price corrections of raw materials (Iron Ore Pellets and Coal), the input cost of Sponge Iron dropped by nearly Rs. 7,000/ton in 2023. However, in the same period, the prices of Sponge Iron dropped by nearly Rs. 4,000/ton, making Sponge Iron makers happy in terms of margins.

What May Happen?

As per industry participants, there is scope for a decline in Sponge Iron prices. However, considering the recent improvement in demand and prices since the beginning of the week, the suppliers are packed with sufficient orders, hence the scope of immediate price corrections is limited. Although, if demand slows down similarly to the previous week, the suppliers may opt for a price reduction, and accordingly, buyers may take the positions as per the need for material.

Read more: Pig Iron Prices Rebound In Central And Eastern India On Improve Demand

For real time commodity prices, latest news, and insights, please download the all NEW and all FREE OfBusiness APP