Rising iron ore price troubles secondary steel units

Unprecedented high iron ore and pellet prices are forcing small secondary steel units (non-blast furnace producers) in India to shut down or reduce steel production. In West Bengal (WB), five such micro, small, and medium enterprises (MSME) have closed down, while 100-115 others curtailed production by between 15-50%, according to the Steel Re-rolling Mills Association (SRMA).

Pellet prices have surged from INR 4500/tonnes ($60.35/t) in May 2020 to INR 15,000/t ($201.13/t) in June 2021, resulting in a cost impact of INR 20,800/t in finished steel production. Despite such high steel prices, 50,000 secondary steel MSME’s plunged into loss, Kallanish notes.

“The induction furnace route steelmakers are also surrendering power requirements from the DVC and the WBSEDCL (West Bengal State Electricity Distribution Company Limited),” says SRMA chairman Vivek Adukia.

Various steel associations from steel-producing states have pleaded to the prime minister’s office and the steel ministry, to impose a 50% duty on iron ore and pellet exports for the last one year, but no action has been taken yet, Adukia adds.

Companies with captive mines and pellet making units are making a profit, but other small manufacturing units are struggling hard to manage hand to mouth raw material requirements. In the wake of unprecedented iron ore prices, associations are also pleading to the ministry to allow a consortium of smaller units (up to 5 members per consortium) to bid in auctions that will help reduce dependence on the open market.

Sayed Aameer India