SMEL Ferro-Alloy Sales Fall as Export Costs and Ore Prices Rise

Shyam Metalics

SMEL ferro-alloy sales declined sharply in May as higher ore prices, Middle East-related logistics costs and weak overseas demand weighed on shipments. Shyam Metalics and Energy sold 16,201t of ferro-alloys during the month, down 18% from a year earlier.

SMEL ferro-alloy sales were also lower than April’s 18,391t, showing that export pressure is affecting near-term momentum. The company said higher raw material costs and more expensive manganese alloy exports contributed to the decline.

SMEL ferro-alloy sales weakness contrasts with more resilient stainless steel demand. This divergence highlights the growing importance of downstream and value-added products in protecting margins when bulk alloy markets weaken.

The company is responding by investing heavily in special bar quality steel, specialty wire rod and downstream stainless steel capacity through projects scheduled for completion by 2029.

Ferro-Alloy Exports Face Cost and Demand Pressure

SMEL’s May ferro-alloy sales fell from 19,869t a year earlier to 16,201t. The decline reflects pressure from both input costs and weaker export economics.

Ore prices have risen sharply, increasing production costs for manganese-based alloys. At the same time, the Middle East conflict has raised freight and export costs, making Indian material less competitive in some overseas markets.

Weak international demand has compounded the problem. Ferro-alloy producers depend heavily on steelmaking activity, so softer orders quickly translate into lower shipments and weaker utilisation.

This is particularly important for manganese alloys, where energy, ore and freight costs all account for a significant share of delivered pricing.

The market environment therefore favours producers with captive raw materials, lower-cost power and stronger domestic customer bases.

Value-Added Steel Becomes More Important to SMEL’s Strategy

SMEL’s stainless steel sales performed better than ferro-alloys, rising by 5.3% year on year to 7,367t in May. However, sales were around 7% lower than April.

Aluminium showed greater weakness, with sales falling by 25% year on year to 1,570t. Volumes were also 17% lower than the previous month.

The mixed performance reinforces SMEL’s decision to increase exposure to higher-margin products. The company is investing another Rs27bn to expand special bar quality and specialty wire rod capacity.

It is also expanding its downstream stainless steel complex, aiming to increase the share of higher-value products in its portfolio.

These projects should reduce dependence on lower-margin commodity sales and give SMEL greater exposure to automotive, engineering and industrial customers.

The strategy is important because bulk ferro-alloy markets can be highly cyclical. Producers with more downstream processing capacity can capture additional value and better manage weak export conditions.

The Metalnomist Commentary

SMEL’s May results show why Indian metals producers are moving downstream. Higher ore, freight and energy costs are compressing bulk alloy margins, making value-added steel products increasingly important for earnings stability.