Pig iron prices in India have hit an all-time high, owing to fast-rising metallurgical coke prices that threaten to damage the economic viability of producers dependant on merchant met coke sourcing, SteelMint notes.
SteelMint data shows that domestic (steel grade) pig iron prices climbed to INR 46,000/t exw-Durgapur in end-Sep’21 – a straight 20% increase compared to end-Aug. Prices have inched up to record highs as production costs of pig iron rose manifold due to the astronomical surge in coke prices.
Coal, coke rally
Domestic metallurgical coke prices (BF origin, 25-60 mm) increased by a staggering 51%, m-o-m, in end-Sep to around INR 50,000/t exy-Cuttack in eastern India from around INR 33,000 t in the last week of Aug.
Furthermore, low-ash coking coal prices – mainly Australian-origin premium low-volatile material – have inched up by a staggering 50%, m-o-m, to $429/t in end-Sep from around $287/t in Aug-end.
Smaller players at receiving end
Market sources informed SteelMint that for manufacturing 1 tonne of met coke, 1.4 tonnes of premium coking coal is required. It can, therefore, be expected that production costs for coke manufacturers have shot up manifold, which has had a direct impact on pig iron producers sourcing coke from the open market.
Notably, integrated steel producers that have quarterly purchase arrangements directly with Australian miners are insulated, to a very large extent, from rampant market fluctuations unlike smaller eastern India-based merchant pig iron producers.
Supply issues
Market sources informed SteelMint that smaller players in the market, especially those along the eastern belt, have had no option but to trim production as costs multiplied beyond control, while prices were slow to rise.
SteelMint learnt from sources that due to production suspensions on high costs, the Indian merchant pig iron (steel grade) market has been witnessing supply pressure for some time now.
In fact, undersupply has been a constant feature of the market for the past few months, so much so that integrated steel producer SAIL has been able to achieve a price of around INR 44,500/t for basic grade material at its latest auction from Odisha – a hike of INR 3,550/t in a span of just about 10 days.
Out of the total merchant output of 4.8 mn t of pig iron in FY’21, SteelMint assessed production of steel grade pig iron at 3.65 mn t, while foundry grade pig iron accounted for the rest 1.15 mn t.
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