Reducing the price of sponge iron

The fall in the price of iron ore, coal and steel led to a decline in the price of sponge iron. Continuing weak demand from the steel industry in June pushed the price of sponge iron down 6 percent, bordering on production costs. Experts believe that the price of raw materials used to make steel should jump after the off-season.

Data compiled by research firm OreTeam Exim showed that the price of sponge iron has fallen in the market since June 1. The drop is largely attributable to a proportional decline in iron ore and coal prices. While the situation in the steel scrap market has improved, its imports have also increased. In addition, the use of production capacity in the global steel industry is on a downward trend. These factors provide a reduction in the price of sponge iron.

The price of iron ore delivered to the port of China, Qingdao, has dropped 12 percent since June 1 and is currently trading at $ 55.63 per tonne. Over the same period, the price fell 6 percent to $ 59.20 per tonne. According to preliminary data, the April-June quarter will remain weak for the world's major steel players, while raw material prices are falling lagging behind domestic demand.

This is how the sponge iron producers earn marginal profits at the current price per ounce. But producers who buy coal at auctions benefit because their cost per ton is lower. Therefore, over the next few years, sponge iron manufacturers should focus on operational efficiency and continued sales of high value-added products, according to an equity research report.

Analysts believe steel demand is suffering from cheap exports from China, Korea and Japan. At the same time, the introduction of import duties in some countries immediately leads to an adjustment of the steel price by $ 6 per ton, for example, in India. To protect the interests of steel producers, the government should raise the import duty. As soon as the demand for steel grows and the price of sponge iron will go up, analysts say.