India: Godawari Power and Ispat’s pellet production hits record high in FY’21

Central India’s leading steel maker,Godawari Power and Ispat Limited (GPIL),recorded the highest-ever yearly production of pellets, iron ore and billets in financial year 2020-21 (FY’21).

• The company’s total pellet production from parent GPIL stood at 2.25 million tonnes (mn t), up 13% year-on-year (y-o-y)while Ardent Steel (ASL), contributed 0.7 mnt,up 3% y-o-y.
• Total steel billets output for the fiscal was at 0.35 mn t compared to 0.34 mn t in FY’20.
• Total iron ore production inFY’21 was at 1.69 mn t against 1.65 mn t in FY’20.

Key highlights of the investors’ conference call:

• Focus on high grade pellets production: China is focused on decarbonisation of its economy which has increased demand for higher grade pellets and iron ore. The company’s volume target for FY’22 is 40-45% of the entire merchant sale of high grade pellets Realisations from high grade pellets are about $20-25/tonne (t)higher the compared to the normal variety.
• Higher pellet sales: Total pellet sales from GPIL rose 18% in FY’21 to 1.6 mn t against 1.36mn t in FY’20. Steel billet sales dropped for the year to 0.14 mn t against 0.16 mn t in FY’20.
• Co to utilise iron ore inventories to lower costs: Last year,the company’s merchant iron ore purchases accounted for 20% of its total requirements,bought at an average price of INR 5,000/t. However, this year,merchant prices have risen to about INR 9,000-10,000/t.GPIL, thus,aims to utilise more of its inventory to minimise iron ore purchases. The company expects to reduce its iron ore purchase from the market to 10% in FY’22, once it receives mining approval.
• Expansion plans:
  GPIL’s iron ore mining capacity will be enhanced to 3 mn t per annum (pa) in FY’22 from the current capacity of 2.1 mntpa.
  Pelletisation capacity will be enhanced to 2.4 mntpa in FY’22 against 2.1 mntpa in FY’21. The steelmaker has received environmental clearance for increasing its pellets capacity from 2.1 to 2.4 mnt. However, the unit is already operational from Q1 FY’22.
  The billets capacity will be enhanced to 0.7 mntpa in FY’22 from 0.4 mntpa in FY’21.
• Financial highlights:The company’s EBITDA stood at INR 1228.9 crore (INR 12,289 million) in FY’21 as against INR 628.9 crore (INR 6,289 million) in FY’20.
• Aiming at carbon neutral growth: The company plans to set up a 250-MW solar power plant to replace its coal-based thermal capacity for captive use, which can save about INR 5/unit. The operating cost of solar is not expected to exceed 5 paise/unit. The unit is expected to be commissioned by Q3FY23.
• Pellet export bookings:Pellet prices in India have hit a 10-year high. Domestic pellets demand and prices are on rise due to shortage in iron ore. Current pellet prices are trading at close to over INR 15,000/t for Fe 63-64%. GPIL’s pellet exports destinations are mainly China and Malaysia. The company’s order book for domestic and exports sales is booked till mid-July at an average realisation of INR 15,500/t.
• Merger with Jagdamba Power & Alloys:GPIL’s merger with Jagdamba Power and Alloys, which owns a 25-MW power unit, has already been approved but is delayed due to the pandemic. Recently,a meeting between the NCLT and shareholders was held, the resultsof which are awaited. Incidentally, Jagdamba has already been supplying power to GPIL for the last two years.