SteelMint: SAIL records over 5,40,000 t of pig iron sales at auctions in FY'22

PSU steelmaker SAIL sold around 0.54 million tonnes (mnt) of basic pig iron at auctions conducted from the company's steel plants in central and eastern India in FY'22, as per month-wise data maintained with SteelMint.

SAIL started conducting regular pig iron auctions from its plants in Jun'20 and sales had reached 0.66 mnt in CY'21, data reveals. Crude steel production by the state-owned steel producer rose 14%, year-on-year, to 17.4 mnt in FY'22 compared with 15.21 mnt in the preceding fiscal.

In terms of allocations of material for auctions, the Rourkela and Bhilai steel plants led from the front followed by Bokaro, Burnpur and Durgapur.

Declining sales volumes

Notably, total monthly auctioned volumes started to decline markedly from Q2CY'21 compared with Q4CY'20 and Q1CY'21. This can be attributed to a variety of factors such as higher internal consumption by SAIL on better realisations in finished steel products and burgeoning prices impacting buying interest.

For instance, combined Jun-Jul'21 sales from the Bhilai Steel Plant (BSP) in Chhattisgarh stood at around 17,000 t - half the auctioned volume of nearly 34,000 t from the flagship plant in May. Although sales at Rourkela Steel Plant (RSP) auctions picked up in July as against June, sales at Bokaro Steel Plant (BSL) auctions witnessed a sharp decline of 67% to just 4,850 t in July compared with June.

Likewise, auctions by Durgapur Steel Plant (DSP) saw volumes shrinking to 1,800 t in July - a straight 70% decrease against 6,000 t in June. The reason was lower allocations by SAIL on higher internal consumption which created supply pressure in the domestic market, especially in eastern India.

Rise in merchant production

Moreover, growing merchant production in the second half of 2021 impacted buying sentiment at SAIL pig iron auctions. With merchant production capacity of 7 mnt/year, India's pig iron production rose in FY'22 with strong export demand from China and the USA in H1CY'21, although demand from China whittled down in H2 on a gloomy steel outlook.

Prohibitively high base prices at auctions impacted sales towards the latter half of CY'21, as record-high global coal prices pushed pig iron and metallics prices higher. Prices rose sharply at auctions in Jan'22 as domestic prices inched close to an all-time high on elevated coal and coke prices amid sustained domestic steel demand. However, SteelMint data shows that sales volumes in Jan'22 dropped by 43% compared with Dec'21 to around 40,000 t.

Again, sales fell by 20% m-o-m in Feb'22 to 27,900 t, although demand remained firm throughout the month even as prices climbed to near-record highs. Despite active participation in auctions during Feb, sales dropped on higher internal consumption by SAIL as finished steel realisations increased sharply.

Prices rose to an all-time high at auctions held in the first week of March. Despite the fact that SAIL ex-Bhilai pig iron prices have risen sharply by around 45%, q-o-q, in April compared with Jan, sales at auctions in March climbed 48%, m-o-m, to over 40,000 t, SteelMint data shows.