India's pellet production rises by around 3% m-o-m in August

• Production recovers to 6.31 mnt from 5.7 mnt in June
  
  
• AM/NS emerges as leading manufacturer with over 1 mnt
  
  
• Buyers seek out new domestic markets as exports dry up
  
  

Pellet production in India rose marginally by around 3% m-o-m in August 2022 to 6.31 million tonnes (mnt) from 6.13 mnt in July, as per SteelMint data. The slight recovery in output was due to the slow yet gradual improvement in steel production in August after scheduled maintenance breaks by mills and producers seeking out new domestic markets amid a stiff export tariff.

On the other hand, production inched up by 3% in January-August this year to nearly 53 mnt compared with over 51 mnt in the same period last year. This is due to rising capacities and higher output in the early part of 2022. However, y-o-y production in August remained largely stable compared to 6.3 mnt in August 2021.

Major producers

Integrated steelmaker AM/NS India logged pellet output at over 1 mnt in August from around 980,000 t in July, while JSW Steel raised output marginally by around 30,000 t to 870,000 t, data shows. Among the other captive producers, however, Tata Steel saw a slight decrease in m-o-m production even as JSPL's production dropped around 40,000 t on-month to 580,000 t.

As per SteelMint estimates, India's pellet capacity has risen to around 120 mnt. The integrated steel plants in the country are the major producers and captive consumers of pellets. Capacity-wise, JSW Steel (including subsidiaries) tops the list at 27 mnt followed by AM/NS India at 20 mnt, JSPL at 10 mnt, while Tata Steel has a capacity of around 7 mnt.

The country recorded production in FY'22 in excess of 77 mnt, of which around 11 mnt was exported.

Gradual recovery

India's steel production rose by 1.2% y-o-y to 10.2 mnt in August, up from 10.1 mnt in July and significantly higher from under 9 mnt in June. Gradual recovery in steel production is supporting balanced pellet production from the primary mills.

Conversely, the slight uptick in pellet prices, especially in the early part of August due to higher sponge prices, kept production supported. After the export duty, and inventory pile-up with pellet-makers, several producers started exploring alternate markets. For instance, SteelMint reported that buyers in western India sourced pellets from the eastern and southern regions of the country as local prices were higher.

That production climbed from 5.7 mnt in June to over 6.3 mnt in August shows that producers have weathered the initial impact of the 45% export duty on pellets imposed in end-May. However, the export-based units are still struggling to remain operational. Domestic realisations for producers are higher than exports at a time of weak steel fundamentals in China. So producers are likely to focus on the domestic market.

India's pellets exports in the first eight months of this year dropped 24% to 6.89 mnt from 9.02 mnt in the same period last calendar. The decline, expectedly, has been the sharpest since June.

Steel demand is still soft owing to which demand for semis and metallics remain volatile. However, expected growth in steel demand during the upcoming festive season and pickup in construction activity are likely to sustain the production momentum in the raw materials segment.