India’s Steel Production Cost Breakdown 2026 — BF-BOF vs EAF

Understanding steel production costs is essential whether you’re a mill operator optimising margins, a trader anticipating price floors, or a buyer trying to negotiate fair pricing. Here’s how the cost structure looks in India right now — with the Hormuz crisis adding significant energy and raw material premiums.

BF-BOF Route (Integrated Mills)

The Blast Furnace — Basic Oxygen Furnace route is used by India’s largest producers including Tata Steel, JSW Steel, SAIL, and AMNS India. This route starts with iron ore and coking coal, produces pig iron in the blast furnace, and converts it to steel in the BOF.

At current March 2026 input prices, the approximate cost structure for producing one tonne of HRC via BF-BOF in India is as follows.

Iron ore accounts for approximately ₹5,500–6,500 per MT. India’s domestic iron ore prices from NMDC have been relatively stable through the Hormuz crisis. Integrated mills with captive mines have an even lower cost here.

Coking coal is the single largest cost item, running at ₹12,000–14,000 per MT of steel (accounting for approximately 0.6–0.7 tonnes of coking coal needed per tonne of steel, at current imported coking coal prices of $220–240 per tonne). This has risen by roughly ₹1,000–1,500 per MT since the crisis began, driven by freight increases on coal shipments and general market tightening.

Energy costs (including power, steam, and process gas) account for ₹3,500–5,000 per MT. This is where the oil price surge hits directly. With oil above $90, energy costs are up roughly ₹800–1,200 per MT compared to pre-crisis levels.

Consumables, refractories, and ferro alloys add ₹2,500–3,500 per MT.

Labour and overhead costs contribute approximately ₹2,500–3,500 per MT, depending on the mill’s efficiency and age.

Rolling and finishing costs add another ₹1,500–2,500 per MT to convert crude steel into HRC.

The total HRC production cost via BF-BOF at current input prices is approximately ₹38,000–42,000 per MT (including overhead, logistics, depreciation, and other unlisted costs beyond the raw material and processing components above). With HRC selling at ₹52,000–54,000 in the domestic market, operating margins are healthy at roughly ₹10,000–14,000 per MT, though they’ve compressed from pre-crisis levels due to input cost inflation.

EAF / IF Route (Secondary Producers)

The Electric Arc Furnace and Induction Furnace route is used by hundreds of smaller producers across India, particularly for long products like TMT bar, rebar, and structural sections. This route melts steel scrap or sponge iron (DRI) using electricity.

The current cost structure for producing TMT bar via EAF/IF is significantly different from the integrated route.

Scrap or sponge iron is the primary raw material, currently running at ₹32,000–35,000 per MT for HMS scrap and ₹28,000–32,000 per MT for sponge iron. The Hormuz crisis has pushed up scrap prices by approximately ₹1,500–2,000 per MT, mainly because Gulf-origin scrap shipments are disrupted.

Electricity is the critical cost differentiator, at approximately ₹5,000–8,000 per MT depending on the state and power source. States like Chhattisgarh and Odisha have lower power costs, while Maharashtra and Tamil Nadu are more expensive. The oil price surge indirectly pushes up power costs where generation relies on fossil fuels.

Ferro alloys, refractories, and consumables add ₹2,000–3,000 per MT.

Rolling and finishing costs add ₹1,500–2,000 per MT.

Total TMT production cost via EAF/IF at current prices is approximately ₹40,000–44,000 per MT. With TMT selling at ₹48,000–50,000, margins for secondary producers are tighter at ₹4,000–8,000 per MT, explaining why IF mills are the first to face pressure during cost surges.

The Hormuz Effect on Both Routes

The crisis has added approximately ₹1,800–2,500 per MT to BF-BOF costs (mainly through coking coal and energy) and ₹2,000–3,000 per MT to EAF/IF costs (mainly through scrap and electricity). This explains why mills have been hiking aggressively — they’re not profiteering, they’re passing through real cost increases.

Try our Energy → Production Cost Calculator to model these numbers with your own specific input prices.

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