India's pellet output rises 10% y-o-y in CY'24, exceeds 100 mnt for first time

• Crude steel production, demand rise y-o-y
  
  
• Pellet consumption rises in BF-based steel mills
  
  
• Share of pellets in DRI production stands at 60%
  
  

Morning Brief: India's production of iron ore pellets grew upwards of 9% in CY'24 to 105 million tonnes (mnt) compared to 96 mnt in CY'23. Notably, the yearly output volume crossed the 100-mnt mark for the first time, while pellet demand stood at 96 mnt, shows data available with BigMint.

The uptick in India's pellet output comes in the wake of steady capacity expansion by manufacturers. Capacity is set to grow 11% to 160 mnt in FY'25 from 144 mnt in FY'24.

State-wise production

Odisha led India's pellet-production in CY'24, recording a 12% y-o-y increase in output to 38 mnt. The higher volume from Odisha was one of the major contributors to the rise in India's total production. Karnataka, the second-largest producer, recorded a modest hike of 3%, with volumes at 18 mnt in CY'24 compared to 17.5 mnt in CY'23.

Interestingly, Jharkhand, which was the third-largest producing state in CY'23, was overtaken by Maharashtra and Chhattisgarh last year. Maharashtra raised its output by 14% to 10.5 mnt in CY'24 from 9.2 mnt in the previous year.

Meanwhile, Chhattisgarh recorded the highest percentage increase in output volumes. The state produced 10.4 mnt in CY'24 against 8.7 mnt in CY'23, which indicates a 20% surge.

Top producers

JSW Group was the top pellet producer during the period under review. It lifted its output by 8% to around 27 mnt in CY'24 compared to 24.8 mnt in CY'23.

AM/NS India's production remained stable y-o-y at 14.1 mnt. TSL Group registered a 27% rise to 12.1 mnt from 9.5 mnt, while JSPL's volumes climbed up by 11% to 8.2 mnt from 7.4 mnt.

Why is India's pellet production surging?

• Crude steel production, demand rise: India's crude steel production in CY'24 rose 6% y-o-y to 148 mnt from 139 mnt. Domestic steel demand also moved higher by 9% to 147 mnt in CY'24 from 134 mnt. Higher crude steel output naturally called for increased usage of raw materials which boosted pellet production volumes.
  
  
• Pellet usage rises in BF-based mills: Data suggests that the share of pellets in blast furnace (BF) based hot metal production went up to 41% from 31%, with the integrated mills planning to boost it to 60%. The latest BF models also feature elevated pellet intake capacity due to redesigned injection systems.
  
  

The increased usage of pellets in the charge mix of BFs is primarily due to their greater energy efficiency. Electric induction furnace (EIF) producers are also consuming a higher volume of pellets for the same reason.

• DRI producers turn to using pellets: In 11MCY'24, India's direct reduced iron (DRI) production touched 49.42 mnt, while the share of pellet-based production increased to 60% in CY'24. Due to difficulties in sourcing iron ore lumps, such as shortages of the higher grades and extended delivery times, sponge iron producers resorted to using pellets as feedstock rather than lumps.
  
  
• Capacity expansions accelerate: In tandem with an uptrend in pellet usage, producers have been steadily ramping up their capacities. While India's production capacity improved by 6% from 135.54 mnt in FY'23 to 144.15 mnt in FY'24, the growth accelerated over FY'25. Capacity is expected to expand 11% to 160.16 mnt in FY'25 from 144.15 mnt in FY'24.
  
  

Odisha is set to witness the highest development, with capacity expanding to 62.13 mnt in FY'25 from 48.7 mnt in FY'24.

• Sustainability benefits lead mills to favour pellets: Pellets offer greater environmental benefits than sinter, as they have quicker delivery cycles and, thus, use up lower resources during transportation. Pellets are transported via road, unlike iron ore, which is dependent on rail rakes, which are often in shortage. With India's increasing focus on greening steel production, the preference for pellets has grown.
  
  
• Iron ore production edges up y-o-y: Domestic iron ore production edged up by 2% to 287 mnt in CY'24 from 281 mnt in CY'23. This enabled higher pellet output.
  
  

Outlook

In CY'25, the capacity expansion of pellet producers is expected to continue at a moderate pace, with an increasing share of mills opting for backward integration and greener steelmaking methods.

Notably, in FY'25, pellet demand is projected to surge by 10-15 mnt, while consumption of DRI may rise to 54 mnt from over 50 mnt in FY'24.

DRI capacity expansion over the same period is projected to grow 10% to 68.8 mnt in FY'25 from 62.6 mnt in FY'24. This indicates that the demand momentum for pellets is expected to continue, at least in the medium term.