How did Indian steelmakers' metallic mix evolve in CY'24? BigMint explores
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- DRI consumption rises 11%, scrap up 6.5% y-o-y
- Hot metal output largely stable y-o-y, up by 3%
- Lower prices, higher availability push up DRI use
Morning Brief: India's metallic mix for crude steel production continued to evolve in CY'24, shaped primarily by an 11% y-o-y rise in direct reduced iron (DRI) yield, which far outpaced the 3% y-o-y growth in hot metal output. Last year, 50% of India's crude steel was produced using hot metal, 29% via DRI, and the remaining 21% through ferrous scrap. DRI consumption rose by 11% y-o-y in CY'24, aided by rapid capacity expansion by DRI producers, an increased focus on sustainable steel production, lower imports of scrap amid protectionist trade policies globally, and availability and pricing concerns.
India's crude steel metallic mix - Highlights
Crude steel output rose 5% to 148 million tonnes (mnt) in CY'24 from 141 mnt in CY'23. The increase aligns with a 9% increase in India's steel consumption, to 147 mnt from 134 mnt. Hot metal production edged up by 3% to 89 mnt in CY'24 from 86 mnt in CY'23, with blast furnace-basic oxygen furnace (BF-BOF) based ironmaking contributing to a significant share of India's crude steel output. Apparent DRI consumption moved up by 11% to 54 mnt from 49 mnt, while production rose slightly higher, by 11.4% to 55 mnt from 49 mnt.
Overall, ferrous scrap consumption increased by 6.5% to 33 mnt from 31 mnt. However, the usage of domestic scrap surged by 22.9%, while the consumption of imported material plunged 23.3%, according to provisional data maintained with BigMint.
Factors influencing India's metallic mix
Lower DRI prices facilitate higher consumption: Both pellet- and lump-based DRI witnessed a 9% drop in average prices in CY'24 versus CY'23. PDRI tags exw-Raipur declined to INR 26,530/tonne (t) in CY'24 from INR 29,280/t in CY'23, while CDRI plunged to INR 27,420/t from INR 30,280/t over the same period. This enabled steelmakers to procure greater quantities of DRI, which is a key raw material in electric steelmaking.
DRI output rises amid lower raw material prices: DRI production received support from lower raw material costs, with both thermal coal and pellet prices trending down y-o-y. India's portside prices of RB3 (4800 NAR) declined by 14% to an average of INR 7,840/t ex-Gangavaram in CY'24 compared to INR 9,150/t in CY'23. South African material of the same grade was at $90/t in CY'24 compared to $100/t in the previous year, reflecting a 10% drop.
BigMint's PELLEX witnessed a minor fall of 0.3%, with prices averaging at INR 9,580/t in CY'24 compared to INR 9,610/t in the preceding year. These factors helped lift DRI output and increase its availability in the market.
DRI producers scale up operations: In keeping with the increased demand for DRI, producers focused on ramping up their facilities. Estimates place India's DRI capacity at 62.6 mnt in FY'24, which is projected to rise by 10% y-o-y to 68.8 mnt by the end of FY'25.
Policy interventions boost domestic scrap generation: Domestic scrap generation was facilitated by schemes such as the end-of-life vehicle recycling policy. The greater focus on sustainability incentivised scrap generation, which boosted domestic supply as well as drove down local offers. For example, HMS (80:20) stood at INR 33,540/t ($388/t) in CY'24 compared to INR 36,190/t (418/t) in the previous year, down by 7%. The industry also embraced greater scrap usage in pursuit of green steel targets.
Geopolitical factors, high prices curb scrap imports: Imports were in short supply due to (1) the adoption of protectionist trade policies around the world and (2) longer lead times because of the Red Sea crisis. Buyers were also unwilling to procure imported scrap due to higher costs. Data shows that imported scrap averaged INR 35,160/t ($410/t) in CY'24, whereas domestic was cheaper at around INR 33,530/t ($391/t).
Outlook
With capacity expansion fast in progress, DRI production and consumption are expected to continue witnessing an uptrend. However, volumes are expected to moderate eventually, as DRI production in India is still largely dependent on the emissions-intensive coal-fired route.
In the long term, DRI is likely to take a backseat in favour of scrap, in line with the government's sustainability push. Both BF-BOF and electric furnace-based routes are expected to increase scrap consumption; the former is projected to see scrap usage increasing at a compound annual growth rate (CAGR) of 13.6%, while a CAGR of 7.8% is estimated for the latter. This suggests that the share of DRI in India's metallic mix may soon fall behind that of scrap.
