The Indian pellet industry has seen a steady decline in capacity utilization rates between fiscal year 21 and 7 months of fiscal year 2026, with a cumulative 10 percent drop in capacity utilization, according to BigMint data.
Over the past five years Capacity utilization rates were at their highest level for many years, at 76 percent in fiscal year 21, and then fell to a low of 63 percent in fiscal year 23. Since then, there has been a slight recovery: capacity utilization was 67 percent in fiscal year 24, 66 percent in fiscal year 25, and 68 percent in the 7 months of fiscal year 2026 (April-October 2025), but the peak of fiscal year 21 remains elusive.This trend seems anomalous, given that steel production in India is growing, and the consumption of sponge iron is also growing. jumped (by 41 percent between 2021 and 2024). It is noteworthy that some large blast furnace manufacturers have also increased the share of pellets in their raw material base to 40-50 percent from 20 percent previously.
Therefore, the question arises: why have Indian pellet producers been unable to increase capacity utilization in recent years? What problems have affected pellet producers? BigMint remains behind the scenes.
Factors affecting the utilization rate of the pellet industry
Capacity expansion outstrips production growth: Pellet production in India recorded a steady compound annual growth rate (CAGR) of about 9 percent in fiscal years 21-25 to 106.3 million tons last fiscal year. Nevertheless, pellet production capacity grew at a faster rate, by 12 percent over the same period, amounting to 161.3 million tons in fiscal year 25.
In absolute terms, pellet production in India increased by 37 million tons over fiscal years 21-25, and installed capacity increased by 69.5 million tons.
The indiscriminate increase in installed capacity was driven by optimism about the growth of steel production and the use of sponge iron. The strong export momentum has also influenced plans for significant capacity expansion.
Export momentum weakens: Weaker exports have reduced shipments from pellet factories, keeping production enthusiasm low.
During the pandemic, in fiscal year 21, exports
