Indian Sponge Iron Prices Hit Two-Year High as Coal Supplies Tighten

· Sponge iron prices surge: India’s benchmark sponge iron prices rose to a two-year high in August, reaching about ₹29,700 per tonne ($313/tonne), according to BigMint.

· Main reasons: The increase is driven by:

o Higher prices of imported coal.

o Tight availability of domestic coal.

o Higher freight, bunker and insurance costs due to Middle East tensions.

o Monsoon-related disruptions to coal mining and rail transportation.

· India is the world's largest sponge iron producer: The country has around 336 sponge iron plants, producing approximately 50 million tonnes annually.

· Major steel raw material: Sponge iron is primarily consumed by secondary steel producers as a raw material.

· High dependence on imported coal: The steel and sponge iron industry accounts for about 40% of India’s imported coal consumption, making it particularly vulnerable to international coal prices and freight costs.

· Thermal coal imports decline: Imports by Indian steel and sponge iron producers fell:

o 19% in July

o After an 11% decline in June

· Middle East impact: Higher bunker fuel and marine insurance costs have pushed up the landed cost of imported coal into India, discouraging sponge iron producers from building inventories.

· Low coal inventories: Producers are reluctant to stockpile expensive imported coal even though their existing inventories remain low.

· Domestic coal shortage: Since May, domestic coal availability has been constrained as supplies were prioritised for the power sector, particularly during the period of high summer electricity demand.

· Monsoon disruption: Heavy monsoon rains have affected both coal mine production and rail transportation, further restricting supplies.

· South African coal under pressure: Sponge iron producers traditionally use imported coal, but competition has intensified because Vietnam, South Korea and other Asian countries are buying more South African coal for power generation.

· International coal prices rise since May:

o Indonesian coal: +18–20%

o Russian coal: +14%

o South African coal: +19%

· Demand remains strong: Despite higher prices, demand for sponge iron remains robust, preventing prices from falling despite weaker coal imports.

· Outlook: Traders, analysts and industry participants expect sponge iron prices to remain elevated for at least another two months as coal shortages, monsoon disruptions and high import costs persist.

Key Takeaway

The Indian sponge iron market is facing a cost-driven price surge, with the combination of expensive imported coal, domestic coal shortages, monsoon disruptions and higher Middle East-related freight/insurance costs pushing prices to ₹29,700/tonne. Continued competition for South African coal and strong steel-sector demand could keep sponge iron prices high in the near term.

[ABS News Service/11.09.2026]

India's benchmark sponge iron prices surged to a two-year high in August as higher prices of imported coal and tight domestic supplies of the fuel push up production costs, traders and analysts said.

The world's biggest producer of sponge iron, India has about 336 plants turning out about 50 million metric tons, mostly used as a raw material by secondary steel producers.

The steel and sponge iron sector is India's biggest consumer of imported coal, accounting for about 40% of consumption, traders say.

As a result of higher prices, India's thermal coal imports by steel and sponge iron makers fell ⁠19% in July after declining 11% in June, according to iEnergy Natural Resources, a coal trader based in the western state of Gujarat.

"Middle East tensions pushed bunker and insurance costs to multi-year highs, lifting landed costs into India," said Vasudev Pamnani, a director at the trader.

Higher costs have dissuaded sponge iron makers from stockpiling coal, even though their inventories remain low, Pamnani added.

The industry has long preferred imported coal but uses domestic coal as a substitute. However, limited domestic coal has been available since May as priority supplies went to the power sector amid higher electricity demand during the summer.

Seasonal monsoon rains have disrupted ⁠coal supplies from mines and rail transport, with fuel inventories at several power generators falling to critically low levels.

"Coal is in short supply," said Rahul Mittal, chairman of the Sponge Iron Manufacturers Association.

"Multiple countries are taking South African coal, which is used by the sponge iron industry."

Several Asian countries, such as Vietnam and South Korea, are ⁠currently turning to South African coal to meet higher demand for power, traders said.

Higher demand has pushed up coal prices across key markets.

Indonesian coal prices have risen 18% to 20%, while Russian and South African prices have jumped ⁠14% and 19%, respectively, since May.

Mittal said Indian coal was the substitute, but monsoon rains slowed dispatches, pushing up sponge iron prices. Demand for sponge iron remains robust, however, he added.

Benchmark Indian sponge ⁠iron prices rose in August to a two-year high of 29,700 rupees ($313) a ton, commodities consultancy BigMint says. Analysts and industry expect prices to stay elevated for at least another couple of months.

($1=94.81 rupees)