Rising iron ore prices send steel ingots up Rs 1,000/t
Iron ore is used to manufacture sponge iron, which is the raw material of steel ingots. As a result, there is a shortage of sponge iron, causing the price of steel ingots to rise.
By Deepa Krishnan, TNN |
MUMBAI: Price of steel ingots have shot up by close to Rs 1,000 per tonne in the last week due to shortage in supply of iron ore.
"Steel prices have been volatile as iron ore supply has been tight due to problems in the mining areas in Orissa," said Delhi-based Supreme Group managing director JK Arora.
Iron ore is used to manufacture sponge iron, which is the raw material of steel ingots. As a result, there is a shortage of sponge iron, causing the price of steel ingots to rise.
This is despite the fact that the dollar is weak. Ideally, this should soften prices, but it has not had much of an effect on steel ingot prices because iron ore prices have jumped by close to Rs 2,000 per tonne. On National Commodities and Derivatives Exchange of India (NCDEX), the price of the October contract has moved up close to 3% from Rs 21,189 per tonne last week to Rs 21,925 on Thursday. Analysts expect that internationally, iron ore prices are set to rise by more than 25-30% next year due to increased demand from China.
On the other hand, according to Mr Arora, demand in India has dulled a bit due to high interest rates, which have prompted large number of payment defaults in the housing sector. This has led to a slowdown in construction, as fresh demand is not picking up. The demand was a bit slow during the monsoons, as construction had stopped.
Steel ingot production was seeing a slowdown due to shortage of both sponge iron scrap and iron ore. This is also making production of ingots expensive. Despite an export duty being imposed on iron ore, the supply is not enough to cater to the demand. However, a weaker dollar and stronger rupee will allow for some respite as imports could become lucrative.
"Steel prices have been volatile as iron ore supply has been tight due to problems in the mining areas in Orissa," said Delhi-based Supreme Group managing director JK Arora.
Iron ore is used to manufacture sponge iron, which is the raw material of steel ingots. As a result, there is a shortage of sponge iron, causing the price of steel ingots to rise.
This is despite the fact that the dollar is weak. Ideally, this should soften prices, but it has not had much of an effect on steel ingot prices because iron ore prices have jumped by close to Rs 2,000 per tonne. On National Commodities and Derivatives Exchange of India (NCDEX), the price of the October contract has moved up close to 3% from Rs 21,189 per tonne last week to Rs 21,925 on Thursday. Analysts expect that internationally, iron ore prices are set to rise by more than 25-30% next year due to increased demand from China.
On the other hand, according to Mr Arora, demand in India has dulled a bit due to high interest rates, which have prompted large number of payment defaults in the housing sector. This has led to a slowdown in construction, as fresh demand is not picking up. The demand was a bit slow during the monsoons, as construction had stopped.
Steel ingot production was seeing a slowdown due to shortage of both sponge iron scrap and iron ore. This is also making production of ingots expensive. Despite an export duty being imposed on iron ore, the supply is not enough to cater to the demand. However, a weaker dollar and stronger rupee will allow for some respite as imports could become lucrative.
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