India: Pellet production up 7% m-o-m in Jul'22 amid hike in pellet offers, seasonal factors

India's pellet production was recorded at 6.13 million tonnes (mnt) in July 2022, a marginal increase of 7% m-o-m as against 5.70 mnt in June 2022, according to the customs data maintained with SteelMint.

AM/NS leading producer

Steel major Arcelor Mittal and Nippon Steel India (AM/NS) emerged as the leading pellet producer in July 2022 with 0.98 mnt. However, production volumes dropped by 5% m-o-m when compared to 1.03 mnt in June.

JSW Steel occupied the second position among the top producers with 0.84 mnt, followed by the Tata Group and JSPL with 0.67 and 0.62 mnt, respectively.

Factors supporting recovery in production

• Hike in pellet prices: SteelMint's bi-weekly domestic pellet (Fe 63%) index, PELLEX, stood at around INR 8,600/tonne (t) DAP Raipur in July 2022, up by INR 650-700/t as compared to INR 7,925/t in June. Hike in sponge prices has supported pellet offers. Pellet-based DRI (P-DRI, FeM 80%) prices in Raipur increased sharply by around INR 2,625/t to stand at INR 34,055/t in the month under review as against INR 31,430/t in June 2022.
  
  
• Exploring alternative markets: The sharp fall in exports post the 45% export duty imposition on pellets affected the productivity of the merchant mills and export-oriented units lowered their output. However, to compensate for the loss, producers started exploring newer domestic markets. Pellet producers based in eastern and central India started selling to buyers in Gujarat and southern India which supported the production volumes.
  
  
• Active demand & seasonal factors: Pellet production continued at a steady pace due to higher demand from the sponge iron sector. Trade activity in the key markets started gaining momentum from the last week of June due to a marginal recovery in steel and sponge iron demand post the export duty imposition. Also, pellets are preferred to iron ore during the rainy season because of their low moisture content.
  
  

Outlook

Some pellet producers continue to operate under lower capacity utilisation. For instance, KIOCL recently notified that the company's pellet plant operations in Mangalore have once again been suspended temporarily from 23 August 2022 due to lack of demand in the domestic market and an unfeasible international market as a result of the imposition of the pellet export duty. Thus, overall production volumes are likely to remain stable in the near term.