The downtrend in Indian domestic pig iron prices has continued during the past week, with prices falling further by INR 1,000/mt ($18/mt) to around INR 21,000/mt ($382/mt) ex-works amid sliding demand and a weak export outlook, traders said on Monday, May 13.
"Sluggish domestic demand has been persistently hammering pig iron prices. Now supply-side pressures have also been mounting, with no export tenders reported from any of the large producers, resulting in more volumes flowing into local markets," a Kolkata-based trader said.
The past week was the second consecutive week in which local pig iron prices have shed INR 1,000/mt amidst adverse market conditions.
According to an Orissa-based producer, high prices of iron ore coupled with prolonged depressed demand have made pig iron production a losing proposition in the long term, while the producer pointed to the shift by Neelachal Ispat Nigam Limited's (NINL) towards production of billets and its reduction of its dependency on commercial sales of pig iron.
Currently, pig iron producers have no pricing power in the market since electric arc furnaces and foundries have been either facing a slowdown in demand for their production or have been faced with power supply issues, resulting in lower capacity utilization.
With such a situation unlikely to change in the medium term, the only alternatives for pig iron producers are to either cut back production or invest in billet-making facilities, the Orissa-based producer added.
However, market sources have said that local pig iron prices will continue to be under pressure since any shift towards billet production can be achieved only in the long term and is subject to the already strained financial resources of pig iron producers.
The sources said that, without the export market reviving in the short term, local pig iron prices can be expected to move towards the next downside target of INR 19,000 ($345/mt).