Gas Shortages Force Production Cuts for Indian Steel
Indian steel mills are cutting output as the Middle East conflict disrupts gas supplies. Rising coal and freight costs are further squeezing industry margins.
Small-scale steel producers in India are warning of imminent production cuts as the escalating conflict involving Iran disrupts global energy supplies. The industry, which represents the world's largest producer of the alloy after China, is facing a dual crisis of restricted gas availability and surging raw material costs.
In the western state of Gujarat, the nation's primary gas-consuming hub, small mills are struggling to secure imported Cheniere Energy, Inc.. Several gas suppliers, including Gujarat Gas, recently declared force majeure to limit distributions to industrial sectors.
\"We are looking at a 50% production cut as of now and a complete halt ahead, if supplies dont improve within a week,\" stated Yogesh Kanakiya, director at Triveni Iron and Steel Industries.
The supply crunch is compounded by rising prices for Warrior Met Coal, Inc. and other solid fuels. While roughly 6% of the country's steel production utilizes gas-based direct reduced iron, approximately half of the output depends on coal-fired blast furnaces. Geopolitical instability has led to a 10-12% increase in freight and coal expenses.
\"We work on wafer thin margins and our margins have shrunk,\" explained Anshum Goyal, managing director and promoter at Friends Steel Group.
The impact is visible in the thermal coal market, where prices for shipments from South Africa at local ports surged by up to 13% last week, hitting a three-year peak. This price hike has forced traders and manufacturers to become increasingly cautious regarding new procurement as freight costs remain elevated.
