Steel firms prefer scrap over local sponge iron

Indian steel companies are said to be preferring to import cheap steel scrap from African and West Asian countries, whose prices are falling, instead of buying domestic sponge iron.

In 2012-13, the country’s import of steel scrap is estimated to have risen 25 per cent to 7.5 million tonne from the previous year, Metal Recycling Association of India said. Scrap prices declined 8 per cent to $390 a tonne in the past four months, despite the better demand.

Many southern and western Indian steel plants are said to prefer scrap over domestic sponge iron. While imported scrap is Rs 22,000 a tonne at western Indian ports, prices of sponge iron, produced mainly in eastern India, are Rs 19,000-20,000 a tonne.

However, if one adds additional transport costs to ferry sponge iron to plants in the western part of the country, the price becomes more than imported scrap.

Import of steel scrap reduced the demand for domestic iron ore among sponge iron makers and this put downward pressure on the domestic price of iron ore.

Further, weak demand for steel products in home markets has impacted iron ore rates, say analysts.

Due to the slowdown in the various steel consuming sectors such as construction, automobiles and capital goods, there has been a slowing in domestic demand.