Indian sponge iron at two-year high, boosted by costly coal imports, domestic shortages

Business Recorder reported that benchmark sponge iron prices in India hit a two-year peak in August, as costlier imported coal and tight domestic supply lifted production costs. India leads the world in sponge iron output, with about 336 plants producing about 50 million metric tons, most of it used by secondary steel makers. The steel and sponge iron segment accounts for about 40% of the country's imported coal use.

Gujarat-based coal trader iEnergy Natural Resources reported that imports of thermal coal by these producers dropped 19% in July, after an 11% decline in June. Vasudev Pamnani of the trader said Middle East tensions had lifted bunker and insurance charges to multi-year highs. He also said makers were holding back from stockpiling coal despite low inventories. Domestic coal has been scarce since May as the power sector got priority and monsoon rains disrupted mine and rail transport.

Rahul Mittal, chairman of the Sponge Iron Manufacturers Association, said coal was in short supply as several countries bought South African coal. Traders said Vietnam and South Korea are among Asian buyers shifting to South African supplies for stronger power needs. Since May, Indonesian coal has gained between 18% and 20%, while Russian and South African coal have advanced 14% and 19% respectively. BigMint put the August benchmark at 29,700 rupees ($313) a ton, and analysts expect high prices to persist for at least two more months.