India: Pellet production rises 10% in FY'26, but growth remains clustered

• Pellet production increases to 120 mnt in FY'26 (P) from 109 mnt in FY'25
  
  
• Growth remains clustered, led by Odisha and Maharashtra
  
  
• Capacity utilisation remains a key concern
  
  

Morning Brief: India's iron ore pellet production increased to 120 mnt in FY'26 (provisional), up from 109 mnt in FY'25, extending the structural growth recorded in recent years, according to BigMint data. Rising crude steel production and higher pellet usage in steelmaking have supported demand, while capacity additions have enabled output growth.

However, the expansion is not broad-based. Production gains are concentrated in select regions, particularly Odisha and Maharashtra, while others such as West Bengal and Andhra Pradesh have stabilised. As a result, growth is increasingly clustered rather than uniform.

Demand drivers remain intact, with higher steel and sponge iron output supporting pellet consumption. Secondary steelmakers continue to rely on sponge iron due to cost advantages over imported scrap, while blast furnace producers have increased pellet usage. At the same time, demand is gradually shifting toward higher-grade and DR-grade pellets, reflecting efficiency gains and tightening environmental norms.

This creates a structural imbalance. While production continues to rise, utilisation remains constrained at around 65%, weighed down by weak export demand, limited availability of high-grade ore, and margin pressures.

State-wise production

Odisha remained the largest producer, increasing output from 39 mnt to 41 mnt, supported by strong ore availability. Maharashtra recorded the sharpest growth, rising from 11 mnt to 14 mnt on capacity ramp-ups.

Chhattisgarh and Jharkhand posted steady gains, while West Bengal stabilised at 14 mnt and Andhra Pradesh remained unchanged at 7 mnt. Karnataka also saw limited movement. Growth, therefore, remains concentrated in select clusters.

Top producers

JSW Group remained the largest producer at 28 mnt, followed by AM/NS (14 mnt) and Tata Group (13 mnt). Jindal Steel Ltd increased output to 10 mnt.

The "Others" category rose sharply from 49 mnt to 55 mnt, accounting for the largest share of incremental output. While large producers continue to expand, growth is increasingly driven by smaller and mid-sized players.

Higher crude steel output has supported pellet demand, while sponge iron production has sustained consumption, though competition from higher-quality scrap in electric routes continues to cap incremental demand.

Capacity additions have enabled output growth, but have also led to underutilisation in several regions. At the same time, fragmented expansion has increased competition and weighed on margins.

Outlook

Pellet production is expected to rise further, supported by steel demand and higher pellet usage in blast furnace operations. The increasing shift toward DR-grade pellets and low-carbon steelmaking routes is also likely to support structural demand.

However, low utilisation, weak exports, and raw material constraints will continue to limit efficiency. The key challenge will be improving utilisation and balancing supply with demand, rather than expanding capacity further.