India's crude steel production up 13% in FY'24. Which were top producing states?

• IF route spearheads production, share rises to 35%
  
  
• Lower coal prices encourage sponge production
  
  
• IF mills see higher margins amid lower coal costs
  
  
• Future capacities to ride BOF route of production
  
  

Morning Brief: India's crude steel production increased by around 13% to 143 million tonnes (mnt) in financial year 2023-24 (FY'24) from 127 mnt seen in the previous fiscal (FY'23).

The growth was propelled by a sharp increase in the share of production through the induction furnace (IF) route.

State-wise production

The state which traditionally leads the country in terms of steel production, is Odisha. In FY'24, its output increased by 3 mnt to 26 mnt (23 mnt in FY'23). Jharkhand followed with 20 mnt (18 mnt). Chhattisgarh was third with 18 mnt (16 mnt). Maharashtra took the fourth slot with 16 mnt (14 mnt), followed by Karnataka with 15 mnt (13 mnt) while West Bengal recorded 11 mnt (10 mnt). Gujarat bagged the 7th rank with 10 mnt (9 mnt).

Segment-wise production

Data shows that the growth in production was undoubtedly spearheaded by the IFs which grew 25% y-o-y to 50 mnt against 40 mnt seem in FY'23. The electric arc furnaces (EAFs) showed 12% growth to 31 mnt (28 mnt). The basic oxygen furnace (BOF) route, in comparison, fell back a little with a mere 5% growth to 61 mnt (59 mnt). IF-EAF combined contributed 82 mnt or more than 56% of the total 143 mnt.

It is interesting to note that the share of BOF fell to 43% from FY'23's 46%. The EAF share remained flat at 22%. But the IF segment's share increased to 35% from the previous 32%.

Why did IF share increase in India's crude steel production in FY'24?

DRI production rises to record high: India's DRI (sponge iron) production rose 20% y-o-y to an all-time high of 52 mnt in FY'24 from 43 mnt in FY'23. This allowed production through the IF route to increase on the back of a readily available and cheaper raw material. Sponge iron production rose as imported coal prices fell around 48% to $109/t CNF Gangavaram in FY'24 as against $209/t in FY'23.

As a result, imports of thermal coal used in the sponge iron sector spurted by 62% last fiscal.

Capacity expansion by major IF players: Major IF players had undertaken capacity expansion which culminated in FY'24. These included Rungta Steel, Rashmi Metaliks, and Shyam Steel in the eastern part of India. Around 10 mnt of capacity was added last fiscal.

IF mills increase output amid higher margins: Further, IF mills which had captive sponge iron plus waste heat recovery plants reaped better margins. This lead to higher production as coal prices were also down, adding to the higher margins. Plus, sponge iron prices were down almost 13% y-o-y in FY'24.

Higher demand for long steel ahead of elections: Longs steel had relatively better demand ahead of the general elections. IF mills saw better offtake in rebar and other construction-related long products compared to the BF-route.

BF capacities also increase: Although the share of the BOF route increased by a minor 2 mnt to 61 mnt in FY'24, some of the primary mills showed increased production y-o-y. AM/NS India's increased the most, by 16%, followed by RINL whose production grew 7%. JSW's output rose a nominal 5% while Tata Steel and JSPL remained almost flat y-o-y. Many of them needed to take production cuts through the course of last fiscal amid sharp supply-demand imbalances.

Outlook

Looking at the future, another 17 mnt of crude steel capacity will be added in CY'24 which will take up the total to 184 mnt. NMDC's 3-mnt plant will be fully operational while JSW will add 5 mnt (at its Vijayanagar works) and Tata Steel Group, 5 mnt in Kalinganagar and 1 mnt at Bhushan Steel. The balance 3 mnt will come from EAF-IF mills.

Upcoming capacities that will be commissioned in the short to medium term will mainly be through the BF-BoF route as these had been conceived much before the global and India's decarbonisation drive got underway.