MUMBAI: Steel ingot prices have moved up by over 17% in the spot market over the last month with iron ore prices touching record highs globally.
The price of steel ingots in the spot market is up from Rs 19,300 per tonne in September to Rs 22,600. The price is fundamentally high, but domestic demand for steel has come to a virtual standstill because construction activity has considerably slowed down, say domestic steel manufacturers.
Delhi-based Supreme Group’s JK Arora said, “The steel prices are high, but the demand is very slack because very little new construction activity is being undertaken.” The high interest rates are proving a dampner. This has led to an overall slump in construction, as there is no fresh demand.
He indicated that if the construction demand picks up, then steel prices could remain at higher levels for some time. Steel prices have been volatile in the last month because iron ore supply has also been tight. Iron ore prices have hit a record of $175 a tonne, in addition to the high shipping freight and railway rates.
The high demand from the Chinese steel industry is also adding to the pressure of global demand for iron ore. The prices have steadily moved up from $140 per tonne levels in August to current levels.
Iron ore is used in both primary and secondary manufacturing of steel. It is a main raw material for sponge iron, which is used to make steel ingots. A shortage in sponge iron is therefore, causing steel ingot price to rise. Steel ingot production was already seeing a slowdown, due to shortage of both sponge iron scrap and iron ore.
This is making production of ingots expensive. In spite of an export duty being imposed on iron ore, the supply is not enough to cater to the demand. However, the strong rupee will allow for relatively cheaper imports to cater to the domestic demand.
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