India’s pellet production touches all-time high of over 75 mnt in FY’22

• Steel majors raise output on higher demand
• Country’s pellet-making capacity witnessing rapid growth
• Export shipments fall on higher domestic realisation

Production of iron ore pellets in India increased by 14% year-on-year to over 77 million tonnes (mnt) in FY’22 from around 67 mnt in FY’21, as per SteelMint data.

Production in FY’20 was recorded at 70 mnt before it fell marginally in FY’21 mainly due to the COVID-19 disruption. However, production recovered significantly in the recently-concluded fiscal on higher demand from steelmaking and greater volumes turned out by the major producers.

The country’s pellet-making capacity has expanded rapidly in recent years with the surge in crude steel production. Current capacity is estimated at over 110 mnt. In 2021 alone, over 70 mnt of new capacity was accorded government approvals in the form of environment clearance (EC) as well as content to establish (CTE), month-wise data maintained with SteelMint reveal.

Top producers

Integrated steel major AM/NS India emerged as the leading producer in FY’22 with pellet output increasing by over 20% y-o-y to more than 13 mnt compared with a little below 11 mnt in the previous fiscal. The steelmaker has total production capacity of 20 mnt/year after its latest 6 mnt/year pellet plant was commissioned in Odisha’s Paradip in Sept’21.

AM/NS has two pellet plants in Paradip of equal capacity and another 8 mnt/year facility at Visakhapatnam.

Among the other front-ranking pellet producers in FY’22, JSW Steel raised output sharply by over 35% to 11 mnt (excluding production at its Dolvi steel plant in Maharashtra) from 7 mnt in FY’21. Post acquisitions through the insolvency route in Odisha and Chhattisgarh, JSW’s pellet capacity has risen to over 27 mnt/year.

While JSPL’s production remained stable y-o-y at 7.7 mnt, Tata Steel saw its FY’22 output climbing 17% on the year to over 7 mnt. Both companies have annual pellet capacity in excess of 9 mnt.

State-wise share

In terms of average state-wise percentage share in total production deduced by SteelMint from monthly output data, Odisha remained India’s top pellet producing state in FY’22 with an overall share of 30% of the national output. The other leading iron ore producing state of Karnataka held a share of 24% in India’s pellet production.

Jharkhand, Chhattisgarh and Andhra Pradesh had a share of 13%, 10% and 9% respectively of the national output in FY’22, while West Bengal accounted for 8% of the country’s total production.

Outlook

Pellet production in FY’22 rose on the back of higher domestic demand amid the significant rise in crude steel production and new capacities coming onstream. Notably, domestic price realisations remained higher than exports, which accounts for the fact that the share of exports in the country’s total output fell to 14% in the preceding fiscal from over 20% in FY’21.

Total export shipments were recorded at 11.17 mnt in FY’22, a drop of 19% y-o-y as against 13.85 mnt in FY’21 mainly on significantly lower shipments to the key consumer China.

Although continuing steel production curbs in China in 2022 may dampen India’s export outlook amid growing domestic iron ore concentrate supplies in China, the general shift towards decarbonisation keeps the long-term outlook for pellet supported. However, the soaring costs of coking coal and met coke might discourage iron ore lump usage by Chinese producers faced with squeezing margins and tilt the balance in favour of pellets.

In addition, geopolitical conflicts and stretched supply chains in different parts of the world may continue to keep export sentiments supported in the near term.

Moreover, India’s iron ore production rose significantly by 23% y-o-y in FY’22 and higher availability of iron ore is expected to help domestic pellet producers raise capacity amid rising steel prices.