Indian Steel Manufacturers Turned Bullish Post Notice To Odisha-based Sponge Iron Plants

Steel makers across regions have strengthened their offers after a notice was received for the closure of plants by a few Odisha (Kalunga and Kuarmunda) based sponge iron including steel plants for January 2023.

Odisha – the largest sponge iron producer in India with an annual capacity of about 12-13 mn t. The state is known as one of the major merchant suppliers of sponge iron to the steel mills (smelters) in central, western, and northern India-based plants.

The Odisha State Pollution Control Board has issued a notification mandating closure of all sponge iron plants based in Rourkela for a month in Jan 2023 with the aim of maintaining air quality for the upcoming Hockey World Cup to be held in the state. Industries and services accountable for coal-based emissions have been mandated to either stop or restrict operations. Analyzing this, the sponge iron makers in neighboring states have also raised their offers.

It is expected that all the sponge iron (DRI) plants in Kuarmunda and Kalunga will shut down their kilns in January, hence, supply tightness is expected to rise, which may support offers across commodities, produced through the mid-sized steel mills.

As per industry sources, if the plants will close, the monthly production loss of sponge iron from the state of Odisha will be around 80,000-100,000 ton.

Out of total steel production in India, about 30-35% is produced from the melting of sponge iron (DRI).

Other factors which are supporting the prices of mid-sized steel plants are:

• Stable (higher) prices of base raw materials i.e. Iron ore, Pellets

• Prices of substitute i.e. scrap remains strong in the global market

• Steel mills (Ingot, billet, and hot charging plants) in Raipur (Chhattisgarh), will face the hit of an increase in production cost as the state govt has raised VCA charges for the industries, which will increase the input cost of standalone billet plants by Rs 500-700/ton from Jan 2023 onwards, as per industry sources.

• Primary mills, who produce steel through the BF (blast furnace) route are optimistic as demand with them is continued active and are planning to further raise their offers for Jan 2023 deliveries.

• As the last quarter of fiscal year is approaching, the steel makers are assuming improve demand from the major construction and infra projects.