Posted on 19 Aug 2020
• Indian pig iron prices inch closer to INR 30,000/t ($400/t), at 20-months high
• Indian pig iron exports rise whereas production falls
•Iron ore price rally due to supply tightness supporting pig iron prices
•Indian pig iron prices rose 30% in last 3 months
The rally in domestic pig iron is striking with prices having shot up by over INR 7,000/t from June-end to mid-August. Current steel grade prices, as assessed by SteelMint, stand at INR 29,700 (exw-Durgapur) on Aug 17 – up 1.3% or INR 400 from the day before.
The prices of steel grade pig iron across major markets in Chhattisgarh, Odisha and Punjab have increased due mainly to tight merchant supplies and increase in export volumes compared to last year.
An indicator of steady firming up of prices are the auctions held by state-owned Steel Authority of India Limited (SAIL)that has sold over 100,000 t through auctions between April and August 12.
The current steel grade price for SAIL’s auctions in Bokaro reported on Aug 12 was assessed at INR 28,850/t – a rise of INR 6,350/t from INR 22,500/t reported by SteelMint onn Jun 9.The PSU steel-maker sold 1,000 t through auctions conducted by IISCO Steel Plant on Aug 17 at INR 29,850-29,900/t.
Merchant pig iron production drops
Falling merchant supplies of pig iron is a critical factor supporting prices. Lag in production compared to FY20 is obvious: Indian Ministry of Steel data show that total production of pig iron in Apr-Jul'20 stands at 0.96 mn t compared to 2.13 mn t in the same period of last fiscal.
Although monthly merchant production has grown to 0.35 mn t in July from just 0.13 mn t in Apr’20 the pace of recovery is slow. Both Vedanta and Tata Metaliks have reported fall in Apr-Jul production mainly due to disruptions caused by COVID-19.
Additionally, with Neelachal Ispat Nigam Ltd. (NINL) not in the market, merchant supplies are remaining tight.
Indian pig iron exports rise
Likewise, exports of pig iron have increased substantially in the Apr-Jul period of FY21 compared to FY20. Exports to China alone during the period were 222,415 t as price realisations were better than the domestic market during the total lockdown.
While Apr-Jul FY20 exports stood at 79,470 t exports during the same period in the current fiscal have jumped to 457,682 t.
So, rising exports and scant merchant supplies have triggered price hike and with domestic demand on the upswing price realisations are turning in the favour of domestic manufacturers.
Prices of private pig iron producers
Merchant pig iron prices, after falling below INR 24,000/t in June, are currently inching closer to INR 30,000/t. So, it is not surprising that domestic producers will raise prices.
One critical factor supporting pig iron prices is the current rally in iron ore prices, with state-owned miner NMDC raising prices twice in Aug’20 and Odisha-based merchant suppliers too hiking offers. Rise inprices results from supply tightness in the market as 14 out of the 19 auctioned mines in the latest round of Odisha auctions earlier this year yet to start operations.
Although buyers are hesitant to take positions at these levels they are exploring alternatives like calcined petroleum coke (CPC). We see limited scope of further upside from current levels while the downside too happens to be capped.
Source:SteelMint
