India’s pellet production falls marginally in Feb; may end FY23 on stable note

• Volumes recover almost 26% from post-export duty levels
• Pellet exports slow down in March amid fall in global prices
• April may see dip in pellet production

Morning Brief: India’s pellet production fell a nominal almost 6% m-o-m in February 2023 to 6.8 million tonnes (mnt) against 7.2 mnt seen in January.

For the cumulative two months of January-February 2023, volumes were at 14 mnt, almost flat y-o-y compared to 13.70 mnt registered in the same two months last year.

Factors keeping production stable

Demand improves: The February volumes have not shown any sharp deviation from the production level generally recorded every month. This indicates that steel demand, even in the secondary sector, was slightly better compared to last year.

Recovery post-export duty removal: India’s pellet production has recovered by almost 26% after dropping to 5.7 mnt levels in June post-the export duty imposition in May. Volumes started recouping from last December itself. Pellet exports in February were recorded at 0.93 mnt, compared to nil seen in September 2022.

Company-wise break-up

AM/NS India was the highest producer of pellets in February, at 1.2 mnt, followed by JSPL with 0.6 mnt. JSW Steel produced 0.9 mnt and Tata Steel 0.5 mnt. All of them more or less maintained their production levels m-o-m.

Current scenario

In March, sponge iron and pellet export prices have also dropped over the last couple of weeks in a fallout of the drop in global prices, especially in China. This resulted in a slowdown in both domestic and export trade in pellets. In fact, the pellet export index recently fell to a two-month low, as market participants waited for margins to improve. But looking at a scenario where coking coal and steel prices are falling, pellet export offers may not rise immediately.

Meanwhile in the domestic market, buyers are preferring NMDC’s DR CLO lumps whose prices were kept unchanged by the miner even though it raised prices of fines and lumps (6-40mm) by INR 200/tonne (t) and INR 100/t effective 21 March.

Outlook

In April, there can possibly be a drop in pellet production as well as export shipments because of the slowdown seen in both spheres in March.

SteelMint expects India’s pellet production to end financial year 2022-23 (FY23) with 78 mnt, stable compared to 78.40 mnt recorded in FY22.