September 08, 2008

Coke price surge forces pig iron makers to use domestic suppliers

BS reported that, faced with tremendous margin pressure due to runaway raw material prices, pig iron producers have started blending domestically produced metallurgical coke with the imported variety in the proportion of 70:30. By doing this, pig iron producers save up on at least 30% of the cost of met coke which has been the only breather in terms of cost control. Prices of iron ore have surged dramatically in the last one and a half month.

Imported mainly from China, coke has gone up to INR 22,000 a tonne from INR 18,000 a tonne during the period while metallurgical coke of domestic origin is quoted at INR 13,000 to INR 14,000 a tonne with 28% ash content.

The benchmark variety with 22% ash content metallurgical coke in India is sold at INR 22,000 a tonne. The prices of iron ore have also spurted by 25% in the last one month, affecting margins. Thereby, independent pig iron producers have reduced their production capacity by half, despite huge build up of demand from steel producers.

An industry source said that "Small and medium size units are presently operating at 40% to 50% capacity. However, captive producers, including SAIL, TATA Steel and Jindal Steel & Power are operating with full capacity."