- September output falls nearly 10% m-o-m
- Consistent output recorded by the primary steel producers
- Merchant producers seek out alternative markets
- Exports drop 60% y-o-y in H1FY’23
India’s iron ore pellet production in the first half of the current financial year (H1FY’23) stood at over 37 million tonnes (mnt), marginally lower from around 38 mnt recorded during the year-ago period, SteelMint data reveals. Production dropped marginally – by around 3% y-o-y – due to the impact of the 45% tariff slapped on pellet exports by the government in late May.
Pellet production remained largely stable as the country’s crude steel production rose marginally y-o-y in Q2FY’23, while declining slightly m-o-m in October to 9.9 mnt. In the January-September period this year pellet production inched up to over 58 mnt from around 57 mnt in the same period last year. However, production dropped to 5.7 mnt in September from 5.9 mnt in the year-ago month.
Major producers
India’s pellet production remains stable, despite the bearish impact of the export duty on the steel market, due to consistent steel production posted by the integrated steel producers that are also the leading producers of pellets.
In September, JSW Steel posted production in excess of 900,000 t, while Tata Steel’s and JSPL’s production stood at around 600,000 t each. However, leading producer AM/NS India reported a sharp 25% m-o-m drop in production to around 800,000 t due to supply tightness and high prices of natural gas, which is the mainstay of its DRI production.
As per SteelMint estimates, India’s pellet capacity has risen to around 120 mnt. The integrated steel plants in the country are the major producers and captive consumers of pellets. Capacity-wise, JSW Steel (including subsidiaries) tops the list followed by AM/NS India at 20 mnt, JSPL at 10 mnt, while Tata Steel has a capacity of around 7 mnt.
The country recorded production in FY’22 in excess of 77 mnt, of which around 11 mnt was exported.
Hunt for alternate markets
India’s pellet output fell in September on the back of a sharp 11% decline in production by producers other than the primary steel manufacturers. Needless to say, the export-dependent units are under considerable pressure to maintain capacity utilisation amid dismal domestic demand and realisations.
SteelMint reported that key producers in central India are staying afloat by means of channelling supplies to the leading primary steelmakers. Likewise, top producers in the eastern belt are seeking out buyers in south India as well as Gujarat as pellet exports have dried up under the twin impact of the steep tariff and subdued demand from China.
As per SteelMint data, exports have fallen sharply by 60% in H1FY’23 to around 2.6 mnt from over 6 mnt in the corresponding period last year.
However, demand for pellets has remained consistent due to stable steel production during the monsoon quarter when supply of iron ore remains traditionally constrained. That apart, supplies of high-grade iron ore as well as lump ore remain tight in the domestic market bolstering the demand for pellets.
This, largely, is the situation in Odisha – India’s leading iron ore producing state, and also Karnataka – another major producing state – where confusion concerning sales following a Supreme Court verdict had kept the market in a limbo, affecting production and dispatches.
Outlook
Steel demand is expected to edge up in H2 of the current fiscal on higher drawdown from the infrastructure and construction sectors. Despite the lethal impact of the export duty and weak steel demand globally due to high inflation and energy prices, major Indian steel producers have kept their sales guidance intact for the fiscal on expectation of a surge in domestic demand. Therefore, it can be expected that pellet production will rise in the remainder of this fiscal from the lows witnessed since June.
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