Struggling with high cost of iron ore fines and distance based charges, pellet makers have requested the central government to help them through this difficult phase.
Availability of cheaper lump ore has impaired pellets demand. On one side where global iron ore prices have slashed by 66% since Apr’14 till date. On the other, lump prices in Odisha have fallen by 54% and fines by 33%. Thus, it is evident that domestic iron ore prices have not fallen in tandem with global prices. Also, consecutive cuts in domestic lump offers have made it a preferred substitute over pellet.
Prices mentioned are monthly average
Australian fines prices are in USD/MT, CFR China
Odisha iron ore prices are loaded to wagons & inclusive of Royalty
Owing to losses incurred, majority of pellet plants in eastern India (major pellet producing region in India) have shutdown their merchant sales and confined to captive production only. Currently, there are only handful pellet suppliers in the merchant market. Thus, Indian pellet industry is going through a tough time and pellet makers seek for measures to support the industry. The pellet makers have suggested for cut in excise duty (currently at 12.5%), distance based charges (INR 300/MT) and removal of export duty (5%) to ease the situation for Indian pellet makers.
In conversation with SteelMint, Mr. Deepak Bhatnagar Secretary General of Pellet Manufacturers Association of India (PMAI) shared, “ In current scenario, the Indian pellet industry is struggling with high cost of iron ore fines, levy of 5% export duty and distance based charges (DBC) for exports. We have requested the central government to remove 5% export duty on pellets so that it improves the competitiveness of pellets manufactured in India.”
He further added, price difference between iron ore lump and fines has narrowed down significantly in recent past as domestic lump has witnessed consecutive price cuts, however, fines prices have not reduced in that ratio. Thus, lump being cost effective is being preferred over pellet as both are mutual substitutes.
Mr. Bhatnagar also quoted, “As a measure to encourage pellet industry, the steel ministry can ask major PSU steel units of SAIL and RINL to use domestically manufactured pellets. Pellets have been proven to be technologically superior over lump ore and sinter. Another measure suggested to encourage the Indian pellet industry is to reduce excise duty by around 50%.”
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