Iron pellet producers in Karnataka have declined their offers for April, 2014 and foresee a southward movement in prices further.
KIOCL, India’s 1st Iron pellet plant located in Mangalore, is a price setter for the Karnataka based pellet industry. The company is offering Pellets at INR 7,700/MT and INR 7,850/MT (basic prices) for sale by sea & road respectively. Following the trend, other Pellet making companies have slashed their offers.
Current Pellet making capacity at 17.7 MnT pa in Karnataka is likely to touch 19.5 in FY15
|
1.8 MnT pa Pellet Capacity addition in Karnataka this Fiscal |
|||
|
Company |
Capacity |
Grade (Fe) |
Current Prices |
|
KIOCL |
3.5 |
63 |
7,700-7,850 |
|
MSPL |
1.2 |
62.5 |
7,800 |
|
Xindia Steels |
0.8 |
62 |
7,650 |
|
BMM Ispat |
2.4 |
60 |
7,100 |
|
Janki Corp |
0.6 |
60 |
7,000 |
|
JSW Steel** |
9.2 |
– |
– |
|
NMDC* |
1.2 |
– |
– |
|
Minera Steel & Power* |
0.6 |
– |
– |
*To be commissioned in 1st half of FY15
**JSW Steel: Captive consumption
Capacity in MnT | Prices in INR/MT
Source: SteelMint
Karnataka sell Pellets to Andhra Pradesh, Maharashtra, Goa & Tamil Nadu based Sponge iron units, which are utilizing about 20% Pellets as raw material burden in the face of higher production from Pellets. About 50% of Sponge iron operational plants are producing half of their installed capacity and reliant on Karnataka e-auction Iron ore for integral linkage and price advantage over Pellets.
Pellet producing companies foresee price to go down for the reason that dearth of power during summer will affect production capacities of induction furnaces, as well as stock level is high at most of the plants. Induction furnaces are using more of imported scrap rather than Sponge iron after INR appreciation against USD. Despite the fact that finish long prices might mount, Pellet procurement is likely to reduce to rationalize the Sponge iron stockpile.
Pellet manufacturers are running the plant at 60-70% capacity and believe that although there was never a huge scarcity of Iron ore in Karnataka’s e-auction, but an uncertainty in regards to quality and prices of ore still exists. Also, fresh stock of ore is being offered at exorbitant prices.
KIOCL Iron Pellet Production rise 38% Y-o-Y in FY14
|
KIOCL’s Yearly Iron Pellet Production & Sales with Capacity Utilization |
|||
|
Financial Year |
Production |
Sale |
Capacity utilization (%) |
|
FY14 |
1.8 |
1.8 |
60 |
|
FY13 |
1.3 |
1.2 |
36 |
|
FY12 |
1.7 |
1.7 |
49 |
|
FY11 |
2.1 |
2.1 |
61 |
|
FY10 |
1.3 |
1.5 |
36 |
|
FY09 |
1.3 |
1.1 |
38 |
|
FY08 |
1.9 |
1.9 |
55 |
|
FY07 |
0.6 |
0.6 |
18 |
|
FY06 |
2.8 |
2.9 |
81 |
|
FY05 |
3.8 |
3.8 |
95 |
|
FY04 |
3.7 |
3.6 |
92 |
|
FY03 |
3.5 |
3.5 |
86 |
|
FY02 |
3.2 |
3.2 |
92 |
Qty in MnT
Source: SteelMint
KIOCL Iron Ore Purchase and Pellet Sale
In Q4 FY14, KIOCL purchased 79 Iron ore rakes from NMDC (Chhattisgarh) i.e. 54 rakes in Jan, 24 in Feb and 1 in Mar; 23 rakes was procured from SAIL Jharkhand mines; 10 in Jan, 6 in Feb and 7 in Mar. 23 shipments were made by KIOCL in Q2-Q4 FY14 (Jul 2013-Mar 2014) for 0.95 MnT domestic Pellet sales.
On 10 Oct, 2013 the company purchased 20,000 MT Iron ore fines (Fe 60) from NMDC Donimalai mines i.e. their first and only purchase in the last fiscal. Floor price was set at INR 2,149/MT (basic) and 12,000 MT was bought at 2,159; the rest 8,000 MT at 2,149.
The company is running its Pellet plant without any captive Iron ore mines, after the hon’ble Supreme Court in its order dated 30 Oct, 2002 directed that the mining activities at Kudremukh Mine can continue till the end of 2005. It is dependent on sourcing Hematite Iron ore fines from NMDC at very high logistic cost. The company is gearing up for an alternative source of logistic chain to source raw material at an economic price.
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