Sponge Iron prices have witnessed a downward trend, many of the units opted to take a shut down and the rest are operating at half of the installed capacities.
In an interview to Steel 360, B. L. Agrawal, Managing Director, Godawari Power & Ispat Ltd (GPIL) stressed that sustainability is a serious concern for Sponge iron plants without backward integration if royalty rate on Iron ore is hiked. He also believes prices of Sponge iron will remain under pressure for the next two years.
Q. Sponge iron industry looks to be in consolidation mode; falling Sponge Iron prices and proposed hike in royalty on Iron ore, where do you see industry heading?
Sustainability is a serious concern amongst Sponge Iron manufacturers. Falling Sponge prices and rising prices of raw materials majorly Iron ore and Coal is already a pain and to add to this is the proposal for increasing royalty. This will have an adverse affect on the industry. Only those who have been able to do the backward integration with Iron ore / Coal mines with their businesses, will sustain and that too not with ease. A nation is said to be developed if it has sound infrastructure facilities. So if India has to become a powerful nation by next decade then it must ensure that its industries and business houses are safeguarded. This obviously has to be coupled with improving environment conditions. Policies have to be framed keeping both the above points in view.
Q. Many standalone Sponge units are willing to sell their plant. What is your piece of advice to them?
Most of the SI units are running at 50% capacity. This sector has already shown a negative growth of 15%. In my opinion, those who can mitigate the risk for next 2 year should stay and those who cannot should exit as soon as possible before this does an irreparable damage to the books.