India: Sponge iron prices witness sharp correction in May amid weak steel demand

• Domestic sponge iron prices fall across all major regions
  
  
• Export offers to Nepal and Bangladesh decline sharply
  
  
• Weak finished steel demand weighs on market sentiment
  
  

India's sponge iron market remained under significant pressure in May 2026, registering one of the sharpest corrections witnessed this year, according to BigMint's assessment. The benchmark pellet-based sponge iron (PDRI) price in Raipur declined by INR 3,650/t from its recent peak of INR 28,100/t exw-Raipur in March 2026 to INR 24,450/t exw-Raipur on 2 June 2026. Similar trends were observed across key sponge iron-producing hubs, with Durgapur, Ramgarh, Bellary, Raigarh, and Rourkela (CDRI Mix) recording substantial corrections of INR 3,200-4,500/t from their peak levels last seen in April 2026.

Continuous pressure from finished steel sectors weighed heavily on sentiment. Lower bids, cautious procurement, and continued corrections in billet prices forced producers to reduce offers across major producing regions. Despite softer pricing, buying activity remained need-based only, preventing any meaningful recovery in market momentum.

Domestic market under pressure

Iron ore-based sponge iron prices declined by INR 1,514-2,307/t m-o-m across key markets. Mandi Gobindgarh recorded the steepest correction, with average prices falling by INR 2,307/t to INR 31,557/t in May from INR 33,864/t in April. Durgapur followed closely with a decline of INR 2,299/t to INR 27,209/t, while Ramgarh and Rourkela witnessed corrections of INR 2,088/t and INR 1,978/t, respectively.

The pellet-based sponge iron segment also faced considerable pressure, reflecting weak demand from billet producers and rolling mills. Durgapur recorded the largest decline among pellet-based markets, with average prices dropping by INR 2,622/t to INR 24,852/t. Hyderabad, Bellary, and Ramgarh also registered corrections exceeding INR 2,000/t during the month.

Raipur, a key benchmark market, witnessed a relatively moderate decline of INR 1,062/t, with average sponge iron prices settling at INR 25,358/t in May.

Export offers weaken, but volumes holds firm

India's DRI export market also softened during May amid subdued regional demand and weaker steel prices in neighbouring countries. Export offers to Nepal declined by $23/t m-o-m to an average of $321/t CPT Raxaul, while offers to Bangladesh fell by $28/t to $329/t CPT Benapole. The decline was largely attributed to Eid-related holidays in Bangladesh, cautious overseas procurement, and weaker steel market conditions in destination markets.

Despite lower prices, export activity remained relatively resilient. Sponge iron export bookings increased marginally to 23,500 tonnes in May from 22,600 tonnes in April, supported by the improved competitiveness of Indian origin material.

Trade volumes reflect cautious buying

Domestic trade activity remained comparatively stable despite the sharp price correction. BigMint data indicates domestic sponge iron trade volumes reached 239,551 tonnes in May, only marginally lower than 245,200 tonnes recorded in April as per BigMint's recorded data. The limited decline in volumes suggests that lower prices encouraged selective replenishment, although buyers restricted procurement to immediate requirements due to uncertainty in downstream steel demand.

Outlook for June 2026

The sponge iron market is expected to remain cautious in June. Lower price levels could encourage some restocking ahead of the monsoon season, particularly among secondary steelmakers. However, a sustained recovery will depend on improvement in billet demand and finished steel offtake.

Export markets may continue to provide partial support, with Indian DRI expected to remain competitive in Nepal and Bangladesh. Nevertheless, unless downstream steel consumption improves materially, sponge iron prices are likely to remain under pressure in the near term.