South Korean steel mills show appetite for Indian Pellets

South Korean steel mills are showing enhanced buying interest for pellets manufactured in India. Though China is the biggest importer of Indian pellets, the sourcing of pellets by South Korea may step up in the near-term.

Industry sources said a team of officials from South Korean steel behemoth Posco recently visited the pellet making facilities of Jindal Steel & Power Ltd (JSPL) and Essar Steel in the eastern state of Odisha. JSPL has a nine million tonnes per annum (mtpa) pellet manufacturing unit at Barbil, Odisha's mining hinterland. Essar operates a port-based facility at Paradip. The current pellet-making facility of Essar Steel Odisha Ltd, a subsidiary of Essar Steel, is six mtpa but the company has plans to double it to 12 mtpa. Both companies export pellets.

Essar Steel and JSPL did not confirm the visit by Posco delegation. However, sources close to the development say, the Posco team has commenced some negotiations but no deal has been sealed yet to procure pellets.

Demand for Indian pellets is expanding with the South Korean steel plants. Annually, the steel makers there need 400,000 pellets every year. Strategically, the South Korean steel manufacturers prefer long-term contracts for sourcing iron ore pellets. The increasing demand for pellets is attributed to the rise in output at Posco's blast furnace which needs high-grade pellets.

In calendar 2017, some pellet shipments from India, of west coast origin, have been exported to South Korea. Data by Steel Mint shows 0.37 million tonnes of iron ore pellets were shipped from India to South Korea. KIOCL Ltd supplies 0.2 million tonnes followed by Jindal SAW at 0.16 million tonnes.

Research by Steel Mint further shows total iron ore pellets exports by India in 2017 stood at 9.68 million tonnes, a sharp surge of 67 percent over 5.79 million tonnes recorded in 2016. China is the biggest buyer of Indian pellets followed by Oman, South Korea, and Japan.