Steel production through induction furnace (IF) mode continued to decline in India in June amid weak demand and liquidity crunch. In June, IF-based steel output fell by 20pc to 24,000mt from prior June, while electric arc furnace (EAF) mill produced 32,000mt steel, up 23pc from prior June, according to the provisional data released by India’s Steel Ministry. 

 

Davis Index analysis shows the tight supply of domestic scrap and higher price of imported ferrous scrap pushed many EAF mills to opt for sponge iron instead of scrap. Billet exports to Asian countries also supported these mills maintain higher utilization rates despite weakness in domestic demand. Capacity utilization has also improved at EAF mills, with most mills operating at 60-80pc levels.

 

India’s steel production in June
RouteJun-20Jun-19Change YoY
BOF43,00045,000-4%
EAF32,00026,00023%
IF-route24,00030,000-20%

 

There are over a 1,000 induction furnaces in the country, which convert sponge iron or melting scrap to semi-finished steel products. 

India produces more than 35mn mt steel annually through IF-route, which is 29pc of India’s total steel capacity. These are mostly small and medium size enterprises and the economic stress induced by the COVID-19 pandemic has seriously damaged the operations of these steelmakers as they depend majorly on domestic steel demand. 

 

Most induction-based furnaces, that are functional post-lockdown, are operating at 30-40pc utilization rate. Cash flow crunch and higher raw material prices have squeezed their operating margins. IF-based mills also lack refining ability and with the Steel ministry’s emphasis on quality steel making through Bureau of Indian Standards (BIS) certification, the road ahead to quite challenging for these steel producers.   

 

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