Mumbai, September 28th (Argus) - Due to soaring electricity costs, declining alloy production, and tight spot supply, some Indian ferroalloy producers are switching to grid power instead of continuing to operate with alloys. The shortage of coal has led to a significant increase in grid electricity prices, making some smelters with their own power generation capacity more profitable in selling electricity than producing alloys. This shift has prompted producers to reduce alloy operation rates and convert available electricity to grid power, further compressing the supply of alloys in the domestic market.
Electricity producers report that coal stocks are severely insufficient, and in some areas, there are even severe supply disruptions. According to market sources, for example, Visakhapatnam only received about 30% of its normal coal quota.
Producers with their own power generation capabilities are increasingly finding that selling excess electricity is more profitable than converting it into alloys. Currently, the grid electricity price is 10 to 12 rupees per kilowatt-hour. If the electricity needed to produce 1 ton of manganese alloy is sold to the grid, it can generate an income of 124,99 to 145,82 rupees per ton (approximately $12,499 to $14,582), making some smelters and market participants believe that selling electricity is more attractive than alloy production.
According to sources, several smelters in Chhattisgarh have reduced their production capacity to about 70%, while smelters in Odisha and some in central India equipped with their own power generation units have sold most of their October power generation through the electricity trading market.
Industry insiders say that the decline in alloy production operation rates is beginning to limit the supply of alloys in the domestic spot market, especially manganese alloys and chrome iron alloys.
Tight supply of manganese alloys
Industry analysts point out that alloy smelters reducing operation rates have begun to affect the supply of manganese alloys in the domestic spot market. This situation has led to the continuous rise in manganese alloy prices. The lowest price of 75# high-carbon manganese iron was approximately 83,500 rupees per ton on September 1st, rising to approximately 90,000 rupees per ton on September 24th.
The increase in alloy prices has prompted producers and traders to increasingly use imported manganese ore for their own use rather than selling it to the spot market, further restricting supply. If the price increase trend continues, major manganese alloy producers in India may also adopt similar strategies, further tightening alloy supply.
In addition, although some smelters have experienced a decline in production, India's manganese alloy exports in the second quarter of 2026 increased by 26.5% year-on-year to 573,195 tons. Strong exports and overseas demand have reduced the supply available to domestic buyers.
Due to concerns about fluctuating freight costs and currency exchange rate changes that may further push up costs and compress supply, overseas buyers are showing greater interest in forward purchases under CFI or CFR terms.
Chrome iron producers shift to high-value-added products
Unlike the manganese alloy market, iron-chromium producers not only face production difficulties but also encounter weak export demand.
Most large stainless steel producers are mostly fulfilling long-term contracts and maintaining adequate inventories, thereby limiting the activity of the spot market. Despite rising coke costs, the青山钢铁集团 still decided to lower the price of chromium iron purchases in October, further depressing the sentiment of the global chromium iron market. China Qinggang is the world's largest stainless steel producer.
Due to rising freight costs and weak market sentiment, overseas buyers are seeking Indian-produced chromium iron under CFI or CFR terms. However, Indian suppliers mostly reject such terms and prefer to sell under FOB terms.
The backlog of standard-grade chromium iron in ports is increasing, leading producers facing power shortages to switch to higher-grade and high-value-added products, including custom-sized materials and high-grade chromium iron with a chromium content of over 65% and low phosphorus content, while reducing the output of standard-grade products.
