Indian sponge iron manufacturers ask government to restrict iron ore pellet exports

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India’s sponge iron manufacturers have appealed to the federal government to restrict the exports of iron ore pellets.

Such a move would help cut the price of steel and increase consumption in the domestic market.

Call for a ban on iron ore pellet exports

The Chhattisgarh Sponge Iron Manufacturers’ Association, in a letter to Prime Minister Narendra Modi, called for the levy of a 30% export duty on iron ore pellets.

The association also called for a ban on all exports above 63% Fe to safeguard the domestic steel producers, especially the secondary steel producers having no captive iron ore mine, the Financial Express reported.

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India exported 12.6 million tons (MT) of pellets in 2019-20, up from 9.3 MT the previous year.

West Bengal association: little beneficiation being done

Another representative body, the West Bengal Sponge Iron Manufacturers’ Association, in a second petition to Modi, said of the total saleable iron ore pellets available in the market, over 60% of it was being exported out of the country at zero duty, with hardly any beneficiation being done, the Financial Express report quotes them as saying.

The association members pointed out over 90% iron ore fines of high grade were being used directly for pellet making and exporting the same was actually against India’s stipulated aim of manufacturing 300 MT steel by 2030.

Pellets are used by sponge iron makers as raw material. India is the world’s largest producer of sponge iron, a substitute of scrap, used in the production of billets, blooms and other semi-finished products.

Many of India’s sponge iron makers share the view that if the prices of the raw materials required to make steel were to come down, the cost of production and, eventually, the sale price of steel would become competitive.

Furthermore, by restricting the exports of iron ore pellets, the price of steel would drop.

Mitigating supply disruption for steelmaking raw materials

On the other hand, the Indian steel ministry has spelled out certain measures it had taken over the years to stop the likely disruptions in iron ore supply and cut India’s import dependence on select countries for coking coal (a key steelmaking raw material).

According to its annual report for the financial year 2019-20, the Ministry of Steel said the steel industry was facing short- and long-term challenges relating to raw material security.

As such, the ministry has started working to ensure raw material security for the sector, Construction Week reported.

Measures included India’s largest integrated steel producer, Steel Authority of India Ltd. (SAIL), being permitted to sell 70 MT of low-grade fines lying at its mines.

The company was also allowed to sell 25% of the total fresh quantity mined from its captive mines.

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The Ministry of Steel submitted a proposal to the Ministry of Mines calling for a reduction in the royalty on iron ore fines from the existing 15% to 5%. The proposal aims to incentivize beneficiation and pelletization, as well as reduce the stockpile of low-grade fines dumped at mine heads.

Comment (1)

  1. PC says:

    Installed capacity of pellets is 90 Million tons per year and capacity utilization is only 80%. How the duty will help sponge producers. Even if the sponge producers are facing shortage of pellets which is unlikely given the fact that pellet capacity utilization is about 80%, their legitimate demand should be to enhance the production of pellets to EC limits as was being done for iron ore.

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