How will India's steel raw materials' demand matrix change in FY'25?

• BF-BOF route to drive incremental production
  
  
• Iron ore demand seeing rising the most y-o-y
  
  
• Sponge iron requirement may increase 4% y-o-y
  
  
• Scrap may remain flat amid higher sponge usage
  
  

Morning Brief: India's crude steel production is expected to grow by a moderate 6% to 152 million tonnes (mnt) by end of financial year 2024-25 (FY'25), as per BigMint's forecast. Volumes in FY'24, it may be recalled, were at 144 mnt.

As per estimates, the bulk of this 152 mnt is to be contributed by the blast furnace players, as their expansion plans had been conceived much before decarbonisation had gained such worldwide urgency.

Thus, estimates show that, in the current fiscal, the share of the blast furnace-basic oxygen furnace (BF-BOF) mills will be at a major 43%. The induction furnace (IF) mills will command 35%, with electric arc furnaces (EAFs) at a lesser 22% share.

NMDC's 3-mnt plant in Nagarnar is slated to be fully operational in the current financial year, while JSW will add up volumes from the 5-mnt expansions at its flagship Vijayanagar works. Tata Steel's 5-mnt expansion at its Kalinganagar plant will also add a considerable amount this fiscal while 1 mnt will come from Bhushan Steel. Phase 1 of JSPL's Angul expansion of 19 mnt is also slated to add to the total capacity. The balance 3 mnt will come from the EAF-IF mills.

The 6% rise in crude steel consumption envisages a 9% increase in hot metal production to 95 mnt against the 87 mnt seen in FY'24.

Iron ore requirement to rise 9% y-o-y: Since the BF-BOF route will command the lion's share of the incremental crude steel production, iron ore demand will rise concomitantly, being the main feed. As per the estimates, demand for iron ore in the current fiscal is thus likely to increase by 9% to 255 mnt in FY'25.

Domestic production of this raw material is set to rise by around 10% in FY'25 to about 305 mnt. Post-domestic consumption of the 255 mnt, the balance 50 mnt or so will be offered through exports.

Production from leading state Odisha may increase by over 10% y-o-y to around 175 mnt. Auctions of the material in states like Odisha, Karnataka and Goa as well as output from a crop of greenfield blocks will keep production supported too.

DRI (gas- and coal-based) demand to rise 4%: Keeping in mind the 3-mnt expansion from the electric furnace sector, demand for gas- and coal-based direct reduced iron (DRI) will rise a nominal 4% or another 2 mnt to 54 mnt in the current fiscal compared to 52 mnt in FY'24.

India's DRI capacity is set to increase further to 68 mnt by end of FY'25 and most of this will come from secondary units in the central and eastern parts of the country. Last fiscal's sponge production was at 52 mnt. Higher pellet output is also seen driving up sponge production over the next couple of years.

Scrap demand likely to remain flat y-o-y: India's ferrous scrap requirement is seen remaining flat y-o-y at around 32 mnt in FY'25. The share of domestically generated scrap may be at 24-25 mnt with the balance 7-8 mnt expected from imports. However, BigMint expects imports to decline from the 10 mnt seen last fiscal, on the back of higher domestic production.Scrap consumption may stay flat amid higher sponge and hot metal availability and consumption.

Met coal (including PCI) share seen rising 4%: With the BF-BOF share higher in crude steel production, consumption of metallurgical or coking coal (including PCI) is seen rising 4% or by an additional 3 mnt to 81 mnt in the period under review from 78 mnt in FY'24. The rise is nominal keeping in focus the overall crude steel production increase.

Non-coking coal demand to rise 6%, feed sponge units: India's non-coking coal requirement is expected to rise 6% y-o-y to about 55 mnt in this fiscal from 52 mnt last fiscal. This volume will be consumed essentially for producing around 68 mnt of sponge iron in the year under review. Within this quantum, domestic production from domestic supplies is estimated at 22 mnt with imported at 33 mnt. Both are expected to slow slight growth y-o-y from 21 mnt and 31 mnt respectively in FY'24.

Way forward

By 2030, India's crude steel production is likely to rise to 212 mnt. This may entail an around 40% increase in both iron ore and coking coal demand.

BigMint to host annual flagship event in Aug'24: BigMint is back with its annual flagship event. The 7th Indian Iron Ore & Pellet Summit, the 6th Indian DRI, Scrap and Steel Conference and the 4th India Coal Outlook will be held over 22-23 August, 2024, at The Leela Ambience, Gurugram, Haryana. This mega event will be an ideal platform for industry leaders, stakeholders and experts to converge and discuss pressing issues and opportunities in the iron ore, pellets, sponge iron, steel and coal sectors. With a focus on seaborne & Indian demand-supply dynamics, policy transformations, and India's journey towards decarbonisation, attendees can expect insightful discussions on global market trends, future trajectories of imports and prices, and the impacts.

You get the opportunity to meet more than 600 participants, over 60 speakers and 20-plus hours of networking. All under one roof.