During the webinar, the reasons for the four-year low in India's sponge iron prices by May 2025 were discussed from multiple perspectives. Panelists emphasized that the slowdown in demand, capacity problems on the supply side and especially geo-political developments were effective in the decline in prices.
Demand Growth Slows, Production Growth Continues
Madhumita Mookerji noted that India's steel production growth has slowed from 13% in FY2024 to 5% in 2025, while sponge iron production is on a downward trend compared to previous years. This has created an imbalance between demand and production, she highlighted.
Tata Steel's Akhilesh Kumar stated that production capacity is on an upward trend, but demand is not keeping up, adding, “Capacities need to be aligned with demand, otherwise pressure on prices is increasing.” Kumar also noted that the decline in coal prices has had a positive impact on production costs, which in turn has reduced sponge iron costs and kept the sector afloat.
Geographical and Seasonal Effects Shape the Market
Vivek Adukia, Vice President of West Bengal Sponge Iron Producers Association, cited the share of Odisha, Chhattisgarh and West Bengal, India's major production centers, in total production and noted that the monsoon season has put pressure on supply. He also added that geopolitical tensions between India and Pakistan have affected government spending, leading to a contraction in demand in the sector. “We expect demand to pick up post-monsoon, with sponge iron consumption set to increase as infrastructure projects accelerate,” Adukia predicted.
Capacity Investments and Raw Material Differentiations
The panel also discussed the increasing use of pellet-based DRI (Direct Reduced Iron) and its impact on the sponge iron market. “Pellet-based DRI is becoming increasingly preferable in terms of cost and accessibility. This is stabilizing the market,” stated Akhilesh Kumar.
Raw material supply constraints, particularly tight iron ore supplies, and recent increases in pellet prices also threaten the sector's profitability. Adukia noted that these factors have increased cost pressure, but the market will rebalance with the seasonal and economic recovery.
Prices to Stabilize in the Period Ahead
The webinar noted that sponge iron prices have hit a four-year low as of May 2025 and are expected to rebound in the third and fourth quarters of 2025. “Currently, prices are at the bottom, but with improvements in the supply-demand balance, prices will stabilize and move upwards,” Kumar stated.
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