Indian sponge iron exports hit all-time high in CY’22, to cross 1 mnt

• Indian sponge iron exports rise 40% y-o-y 
• Imports from Nepal rise exponentially
• Bangladesh remains steady buyer 

Morning Brief: India’s sponge iron exports have hit an all-time high, reveals data maintained with SteelMint. Over January-November, 2022, volumes have already crossed 0.94 million tonnes (mnt) and, obviously, these will touch 1 mnt by the end of the calendar. 

Reasons for rising sponge iron exports 

Nepal’s imports from India surge: A key reason is the rise in imports by neighbouring Nepal. Data showed that its volumes have steadily risen from a mere 60,000 tonnes (t) in 2017 to 0.26 mnt in 2021 and spurted to 0.49 mnt in January-November 2022. Nepal has a reason for the rise in DRI consumption. It is doing so at the cost of lifting less of billets. The country’s mills have been increasing their melting capacities. As a result, these mills are preferring to manufacture billets using sponge iron rather than importing the semi-finished item. In fact, Nepal’s imports of billets have plunged from over 1 mnt in 2021 to 0.44 mnt over January-November, 2022. In comparison, as already mentioned, sponge iron exports have risen exponentially.   

Imports from Bangladesh stable: Imports of sponge iron by this South Asian country has been more or less stable, rising nominally to 0.37 mnt in January-November against 0.36 mnt in full year 2021. The country needs to import sponge iron keeping in mind its rising steel capacities. However, imports, could have been more had Bangladesh not been plagued by issues like a weakened currency, subdued demand for finished steel and restrictions on opening new LC accounts to stem further forex drain. 

Nepal’s flexibility in using pellet/lumps-based DRI: It may be mentioned that a technical factor is also supporting Nepal’s increasing imports of Indian sponge iron. Bangladesh does not import pellet-based sponge iron, preferring only iron ore lumps-based. Nepal, on the other hand, being land-locked and totally dependent on imports, buys both pellets- and lumps-based material. 

Meanwhile, around 65% of India’s sponge iron is pellet-based which gives Nepal an added and cost-effective edge. Unlike port-based Bangladesh, for Nepal, importing scrap will be an expensive proposition since that material will have to first land at a nearby port, say India, and then get transported across to its shores. In Bangladesh, on the other hand, more than 80% of its raw material requirement is being met through imported scrap, it being a coastal country. 

Overview of Indian sponge iron industry 

India is the largest sponge iron or DRI producer globally with an output volume of around 40 mnt annually in which the share of coal-based is about 30 mnt, the balance being gas-based.  

Around 1 mnt is being exported in which the share of Nepal and Bangladesh comprise more than 90%.  

Outlook 

Sponge iron exports from India are expected to continue increasing, sustained by the growing demand from both Nepal and Bangladesh. Once macro-economic factors strengthen globally, exports of the material from India can increase even further. 

Nepal’s steel industry is growing significantly in terms of capacity. The total annual capacity of the industry is about 3.5-4 mnt per annum and annual steel demand is about 2-2.5 mnt. Both factors will support increased sponge iron exports from India. 

SteelMint Events will hold the 2^nd Nepal Trade Summit on steel, coal and cement over 1-2 March, 2023. The venue is the Soaltee Crown Plaza, Kathmandu, Nepal. To know more about Nepal’s steel trade dynamics and changing import preferences, and to hear the views of renowned global industry participants, book your seat now.