Steel prices are heading northwards yet again. Prices of steel ingots have increased last week by around 8 per cent to about Rs 17,200 per tonne.

But that is not all, as another round of hikes is expected soon with sponge iron prices, a critical input, having jumped by around Rs 1,000 per tonne.

Riding on the back of increased demand for sponge iron, due to a global shortage of scrap and resulting high scrap prices, the domestic sponge iron majors Jindal Steel & Power, Monnet Ispat, Vikram Ispat, Tata Sponge & Iron have hiked the prices by Rs 1,000 per tonne to about Rs 9,400-9,600 per tonne.

Sponge iron producers expect prices to remain firm for the next months, with marginal rises in the next quarter. A steel analyst said, "Sponge iron is used by re-rollers and secondary steel producers and any increase in sponge iron prices will have a direct impact on the steel prices."

Sushil Maroo, chief financial officer, Jindal Steel & Power told Business Standard, "There is a severe shortage of scrap globally, which has pushed up the scrap prices as well as the demand for sponge iron in the country." Jindal Steel & Power is the largest coal-based sponge iron producer in the country with an annual capacity of 650,000 tonne.

Confirming the price increase, Ajay Bhat, chief financial officer at Monnet Ispat said, "The price rise is mainly due to the demand pull as the prices of substitutes (scrap) have increased substantially in the last few months." Monnet Ispat has an installed capacity of 300,000 tonne per annum.

The rise in steel ingot prices has primarily been in the northern markets following stringent inspections by the state road transport department officials to prevent overloading of trucks above the permitted axle load capacity.

Analysts said, "This could lead to a sharp rise in the prices of thermo-mechanically treated steel bars, which form the basic structure for all construction activities."

The operators have been reportedly transporting around 15 tonne and above per truck, which is 50 per cent higher than the permitted 10 tonne.

State road transport inspectors have been on a strict vigil across the borders of Uttar Pradesh, Haryana, Delhi, Himachal Pradesh, Punjab and Chhattisgarh, resulting in a supply reduction in the markets, leading to price increases.