In Commodity News 22/05/2015
Slack export demand coupled with declining iron ore prices could stress pig iron prices further and eat away profit margins.
The prices, which have already come down by around 4% in the past one month, are set for further decline amid bearish cues, producers said.
“Pig iron rates are showing downward trend since last two months. The raw material prices are also declining and it might affect the prices further,” said S N Panigrahi, assistant general manager of MMTC-managed Neelachal Ispat Nigam Ltd (NINL), the largest producer.
In domestic markets, high grade iron ore rates have come down to around Rs 3,000 levels at mining areas, lower than Rs 4,200 seen in January this year.
The state-run company was forced to cut its rates twice in the last one month due to negligible response from export tenders. It is currently quoting pig iron at Rs 17,500 per tonne (ex-Cuttack) and is offering additional discounts of Rs 200 for bulk purchases in domestic markets.
Apart from low demand, it is higher supply that is pressurising the prices, industry officials said.
“Since export demand has come down, major pig iron producers are selling their products in the domestic market, thereby adding supply side pressure on the product,” said an official of a Bombay Stock Exchange (BSE)-listed pig iron maker.
The weakness in steel grade pig iron has affected demand for foundry grade pig iron, used in making automobile parts. Though foundry grade is always sold at higher rate than steel grade, decline in steel grade has affected its rates.
“Users of foundry grade pig iron often try to blend steel and foundry grade along with silico manganese to reduce operating cost. So a fall in steel grade pig iron will surely affect foundry grade too,” said the official of the listed pig iron maker.
Foundry grade pig iron is sold in the range of Rs 22,000 to Rs 24,000 per tonne depending upon distance from plant to consuming industries.
According to Centre for Monitoring Indian Economy (CMIE), the declining trend might continue in the current fiscal on poor demand for finished steel and on possibilities of better availability of iron ore.
“Muted demand from user industries and lower cost of raw material led to the dip in prices. The trend is likely to continue with pig iron prices expected to slump by 6.8% in 2015-16,” it said in a report recently.
