India’s sponge iron exports were recorded at 560,000 tonnes (t) in the first 11 months of CY’21 (Jan-Nov’21), according to customs data maintained with SteelMint. Bangladesh remained the largest importer with 280,000 t, followed by Nepal with about 230,000 t.
Nepal fastest-growing importer
Nepal has always been a top importer of Indian steel products. In the past few months, its imports of sponge iron from India have seen a spurt.
Total exports of the material to Nepal from India in CY’20 were recorded at 170,000 t, an increase of 17%, y-o-y, compared to 140,000 t in CY’19.
Till Nov this year, India exported 230,000 t of sponge iron to Nepal, a whopping 70% rise compared to the same period last year (Jan-Nov’20) and higher by 40% compared to total exports registered in CY’20, data maintained with SteelMint shows.
India exported 36,276 t of sponge iron to Nepal in Nov. On a yearly basis, export volumes witnessed a 2.5-fold increase compared to just 13,620 t in Nov’20. On a m-o-m basis, exports jumped up 47% compared to 24,954 t in Oct’21, according to SteelMint data.
These volumes are expected to touch around 400,000 t, almost double in CY’22, compared to total imports this year.
Sponge demand set to grow
The Himalayan Kingdom has substantially increased sponge iron sourcing from neighbouring India in recent years.
Earlier this year, the Nepal government slashed customs tax and excise duty on imported sponge iron to zero for FY’22 from 5% earlier, citing the need to facilitate domestic manufacturing growth. This encouraged local induction furnace steel producers to import more sponge iron.
Taking advantage of the duty removal, several steel producers in Nepal either came up with expansion plans or considered setting up their own induction furnaces to save production costs.
Thus, going forward, sponge iron sourcing from Nepalese producers will only increase. Consequently, billet demand from the country will naturally go down.
At present, Nepal imports about 200,000 t of sponge iron annually with India being the sole exporter, while billet imports are at 1-1.5 million tonnes (mn t), with a major chunk coming from India and the rest from China.
Melting capacities
Nepal’s annual installed melting capacity is about 500,000-600,000 t, an increase from 400,000 t earlier. Currently, mills in Nepal melt roughly about 80% of sponge iron and the remaining scrap and other metallics to produce a tonne of hot metal.
Outlook
Nepal’s current steel demand is at 2.5 mn t pa, an increase from around 1.4 mn t in CY’19.
India’s sponge iron exports is expected to increase in the near term with setting up of new furnaces in Nepal and the resumption in operations at existing furnaces. However, this is likely to negatively impact India’s billet export volumes, as a major share of it goes to Nepal. Indian induction furnace steel mills’ billet exports are likely to be impacted more than exports by the primary steel producers, SteelMint understands.
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