Small Indian steelmakers cut output as fuel costs rise
Small Indian steel mills are cutting production as Middle East tensions disrupt gas supplies. Rising coal and freight costs further squeeze industry margins.
Small-scale steel producers in India are warning of imminent production cuts as the conflict involving Iran disrupts global energy supplies. As the world's second-largest steel producer after China, India's secondary steel sector is particularly vulnerable to fluctuations in the liquefied natural gas (LNG) market.
In the state of Gujarat, the country's primary gas-consuming region, several manufacturers have reported restricted access to energy after Gujarat Gas declared force majeure. Yogesh Kanakiya, director at Triveni Iron and Steel Industries, stated that his firm is facing a 50% reduction in output with the potential for a total shutdown if supplies do not stabilize within a week.
We are looking at a 50% production cut as of now and a complete halt ahead, if supplies dont improve within a week.
The energy crunch extends beyond gas, as geopolitical tensions drive up the cost of imported coal and freight. Prices for thermal coal from South Africa reached a three-year high at Indian ports last week, increasing by up to 13%. This surge in global energy costs is also being monitored by major suppliers like Warrior Met Coal, Inc., as the industry seeks alternatives to gas-based production.
Anshum Goyal, managing director at Friends Steel Group, noted that shrinking margins are making it difficult for producers to set competitive prices as they grapple with rising operational overheads.
We are concerned over supplies and it is affecting our decision-making in terms of prices we need to keep.
According to the Sponge Iron Manufacturers Association, roughly 50% of India's steel production depends on coal-fired blast furnaces, while 6% uses gas-based direct reduced iron. Rahul Mittal, the association's chairman, reported that coal and freight expenses have risen by 10-12% recently due to the ongoing regional instability. Vasudev Pamnani, director at i-Energy Resources, observed that Indian buyers are becoming more cautious as global coal prices remain elevated and shipping logistics become more complex.
