India's merchant pig iron production seen rising 15% in FY24

• NMDC, Bengal Energy to contribute to additional capacity
  
  
• Infra, auto segments to push up demand
  
  
• Exports in Apr-Jul fall sharply y-o-y
  
  

Morning Brief: India's merchant pig iron production in the current financial year of 2023-24 (FY24) is likely to rise by around 15% to 6.73 million tonnes (mnt), from 5.85 mnt seen in the previous fiscal of FY23, as per SteelMint's forecast.

The major portion of the additional production is expected to come from NMDC and Bengal Energy, who may cumulatively contribute around 0.40 to 0.50 mnt, SteelMint understands.

Factors that will pull up pig iron production

India's increased hot metal production: The country so far has been the only bright spot on an otherwise dull steel production firmament. Most countries have been treading in negative output territory for more than a year now amid inflation and currency slides. However, India's crude steel production has shown healthy growth on the back of moderate demand and a strong infrastructure push. It is currently at 126 mnt and is expected to hit about 135 mnt by the end of the current fiscal.

Similarly, India's hot metal production is likely to increase by around 9% to 88 mnt in FY24 from the current 81 mnt, which, in tandem, will obviously push up pig iron output.

Higher supplies from domestic producers: NMDC is looking to inject 0.20 mnt of pig iron, mainly from its Nagarnar Integrated Steel Plant for the next three months, till such time its hot strip mill goes onstream. Bengal Energy is also seen contributing 0.20 to 0.30 mnt and, Atibir, another 0.20 mnt. Not much additional capacity is expected from the other existing players.

Increased demand from infra sector: With the government's concerted infrastructure push, demand for ductile iron (DI) pipes is expected to escalate, which in turn will pull up pig iron demand. Producers are also betting big on infra project deadlines which have to be met by the fiscal year-end. This will lead to a sudden spurt in pig iron demand towards the fiscal close.

India's pig iron consumption over April-July, 2023 was at 2 mnt and, in entire FY23, had touched 5.46 mnt, as per SteelMint's data.

Accelerated automotive push: That apart, India's automotive sector is also expected to give a leg-up to pig iron production, a material used in making vehicle components. Recouping from the Covid impact in 2020-21, India's total passenger vehicle (PV) production rose to 4.58 million units in FY23 from 3.65 MU in FY22. The PV sales market is expected to grow 5-7% in FY24, as per some reports.

Exports scenario

Meanwhile, in FY23, pig iron exports comprised 0.53 mnt of the 5.85 mnt produced. In April-July, 2023, exports were at 0.16 mnt, far lower from the 0.43 mnt seen in the same four months in FY23.

Outlook

However, there can be a downside to the increased output. Some sources feel, while demand is slated to increase, with the rise in pig iron production, prices may come under pressure in the third quarter (October-December) of the current fiscal.