As per SteelMint’s special report –INDIAN STEEL MARKET YEARLY REVIEW 2017, the analysis shows rise in India’s coal based sponge iron production by 6.36 percent to 24.4 MnT in FY17, from 22.93 MnT during FY16.
Further, for the ending of current financial year (FY18), the sponge iron production is also expected to grow by around 4 to 5 percent against FY17 over increase demand and rising productions of key raw materials like – Iron ore, Pellets & Coal as well.
India is world’s largest sponge iron producer and has an installed capacity of around 47-48 MnT, out of which 8-9 MnT is gas based and 39-40 MnT is coal based, with over 400 sponge units. Sponge contributes 25-30% of India’s total crude steel production of 96-97 MnT.
And the major sponge iron producing states in India are Odisha, Chhattisgarh, Gujarat, Karnataka, West Bengal & Jharkhand.
Country wise Exports & Imports –
During CY17, the nation’s DRI export has witnessed phenomenal rise over the last year, rising by almost 85% Y-o-Y to 0.55 MnT DRI. The major importers of Indian DRI were was Bangladesh (46.38%), Nepal (10.73%), Bhutan (9.56%), Indonesia (6.98%), Thailand (5.83%) & Kuwait (5.20%) along with Oman, Malaysia, Saudi Arabia & South Africa.
In context to imports, Sponge (DRI) imports in India were recorded at 0.09 MnT in CY17 & major imports are reported from United Arab Emirates (0.06 MnT), South Africa (0.02 MnT) & Saudi Arabia. Prior to this India imported 0.02 MnT of DRI in CY16.
Driving Factors for rising Indian Sponge iron Production-
— Boost in Iron ore productions: In CY17, Indian iron ore production achieved remarkable growth. India has produced 201.8 MnT in CY17 up by 9% against 184.5 MnT in CY’16, as per Indian Bureau of Mines data.
— Rise in Pellet Production: KIOCL (formerly Kudremukh Iron Ore Company Ltd) recorded a growth of 59% Y-o-Y pellet production for FY18 at 2.32 MnT against 1.46 MnT in FY18.
— Increased Domestic Coal Productivity: India’s majors coal Producer- CIL has recorded a growth of around 4% Y-o-Y in CY17 & stood at 560 MnT against 543 MnT in CY16
— Falling scrap imports: Indian scrap imports fell by 15% in CY17 & stood at 4.57 MnT against 5.35 MnT in CY16.
— Rise in Crude steel output: The country’s crude steel production reported a growth of 4.5% Y-o-Y & stood at 100.1 MnT in CY17 against 95.76 in CY16.
Reasons for Price Rise
— Rising Raw material prices: NMDC (C.G) increased iron ore prices for Fe 64% fines by 28% in CY’17 against CY’16. Inline Odisha merchant miners also increased fines prices by 14% in the same period.
— Strong export demand: Rising exports by steel manufacturers (specially based on coastal region) is supporting sponge market
— Expensive scrap: With imported scrap prices moving up, mills prefer sponge iron or domestic scrap.
Outlook
Looking at current demand-supply dynamics there are less possibilities for declining scrap prices globally. Thus, indications are high for strong demand for Indian Sponge/DRI.
Nepal & Bangladesh are the major export destination of Indian DRI which are ramping up steel capacities, this may support Indian DRI export volume and indirectly to prices as well.
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