Megatherm – Mega Opportunity

My Takeaways on Furnace Industry

• Typically, the hot metal is converted into steel through the basic oxygen furnace (BOF) route, while DRI (direct reduced iron) is converted to steel in an electric arc furnace (EAF) and an induction furnace (IF).

• The larger integrated steel plants (ISPs) typically use the BF-BOF and DRI-EAF pathways, whereas smaller plants use the coal-based DRI-IF pathway.

• A higher growth of 8% and 12% was observed in (Electric arc furnace) EAF and induction furnace (IF) routes of steelmaking compared to 7% for the BOF route.

• Green hydrogen can be used in blast furnaces and gas-based shaft furnaces as a substitute for fossil fuels since it has significantly lower breakeven cost than coal & natural gas. Tata Steel has demonstrated hydrogen injection in blast furnaces while JSW is planning for hydrogen injection in shaft furnaces.

• Despite lower breakeven cost than coal & natural gas it very unlikely to substitute due major challenges such as high capex required for modifying the furnaces, lack of a fully developed ecosystem and availability of green hydrogen.

• There are around 1032 Electric Induction Furnace (EIF) units in India with a total installed capacity of 68.8 Mt. The production through the EIF units is 50.4 Mt registered a capacity utilisation of 73% and contributed to 35% of crude steel production in India.

• Continuous technological developments and the availability of bigger-size furnaces enabled EIFs to contribute to steelmaking in India. The furnace capacity ranges from 8 tonne to 60 tonne.

Potential Problem or this an opportunity?

IF mainly uses scrap or a mix of scrap which consist 40-60% scrap material

Extremely low consumption of scrap totalling 33.36 Mt in FY24

All this round me back to the question, Is there really a significantly market size for Megatherm Induction Ltd? (Critics/opinions are appreciated)

Disclosure : Not invested, My understand may be about the business is very little