Neelachal Ispat Nigam Limited (NINL), the largest producer of pig iron in the country, has decided to halt its export trade for the time being due to poor international demand.
"We cancelled a global tender for pig iron sales last week as traders quoted only $400 per tonne while we wanted to sell it at $440 a tonne. We have decided not to float any tender till the market revives,” said S P Padhi, financial director of NINL.
In dollar terms, pig iron rates have come down by $90 to $100 a tonne to trade at $468 a tonne in the past three quarters. Even though the rupee weakness against dollar has offset some of the losses, manufacturers are reeling under rising input cost which is making it hard for them to sell at lower rates.
However, it is poor demand rather than rising cost of production, which is making it more difficult, NINL said.
In 2011-12, exports of NINL contracted by a fifth to 328,771 tonnes on lower shipping orders from South Korea, Taiwan and other Southeast Asian nations. As the weak trend is continuing in the current fiscal too, the pig iron maker has slashed its monthly production by nearly 30 per cent.
"We used to produce 60,000 to 70,000 tonnes every month three-four months ago. But now the output has come down to 50,000 tonne per month,” Padhi said.
NINL, jointly promoted by MMTC Ltd and the Odisha government, is the largest producer and exporter of pig iron in India since 2004-05. India produces around 5.5 million tonnes of pig iron every year.
Pig iron is the solid form of hot iron metal, obtained by smelting iron ore with coke. Though most integrated steel plants use this intermediate for steel making, they also set aside some quantity to sell in the domestic as well as international markets, to be used in electric arc furnaces and in foundries.
The falling demand for pig iron is in sync with the slower buying interest for other steel making commodities such as iron ore and coal in global markets, following economic uncertainties in Europe, said Padhi.
In absence of international trade, NINL is focusing on domestic market to sell its product, even as rates have declined to Rs 24,000 per tonne, down from Rs 26,000 a tonne in May.
"We do not see any drastic change in international demand very soon, but hope the domestic demand would start to rise from October onwards,” he said.