India: Steel export duty, low demand weigh on sponge iron prices in May

Domestic sponge iron (PDRI and CDRI) prices across key markets in India continued to move downwards in May. Prices have been falling since April due to weak demand and falling semi-finished steel and pellet prices.

However, the key factor that weighed on prices this month was the export duties imposed on steel products and raw materials.

Prices across markets

• Raipur: Pellet-based sponge (PDRI) prices stood at INR 33,840/t exw, down INR 2,940/t m-o-m.
  
  

About 56,350 t of PDRI deals were recorded by SteelMint last month.

• Bellary: PDRI prices decreased by INR 2,330/t to INR 34,450/t exw in May. SteelMint recorded 60,050 t deals in the month under review.
  
  

CDRI prices dropped INR 2,510/t to INR 35,260/t exw. Deals for about 48,750 t were recorded last month.

• Rourkela: Prices of CDRI sponge iron were recorded at INR 34,820/t in May, a decrease of INR 3,340/t compared to April. A total of 72,905 t of deals were recorded in the month.
  
  

Factors pushing sponge iron prices lower

• Limited demand: Sponge iron demand continued to remain low in May due to lower bids and sluggish trends. Moreover, uncertain price movement remained a key factor limiting trade volumes. As per market sources, most manufacturers cut production due to higher input costs. A few plants have also shut down to avoid losses.
  
  
• Fall in semi-finished steel prices: Semi-finished steel demand in the domestic market was subdued last month. Buying interest remained limited along with lower bids due to poor demand for finished steel products, while inventories at mid-sized plants continued to rise. This not only put pressure on billet prices but also led to the decline in spot trades.
  
  

 SteelMint’s billet index was assessed at INR 50,890/t exw-Raipur in May, a decrease of INR 5,030/t m-o-m.

• Impact of export duties: Sponge iron prices fell steeply on account of hefty export duties imposed by the government on steel and steel-making raw materials. Following the announcement of duty imposition, market participants adopted a wait-and-watch approach awaiting clearer price directions which, in turn, led to suppliers floating only limited offers. Even the regular buyers held back in anticipation of further decline in prices.
  
  

Outlook

Domestic sponge iron prices may continue to remain volatile in the near term. Considering input costs, a significant fall in sponge iron prices is unlikely as this will directly impact production.