Conversion Spread of Induction Furnaces Remain Low in Central India

Despite significant surge in Ingot/Billet prices since more than a month, the margins (conversion spread) of EA or Induction furnaces remained low in Central India – Raipur. The manufacturers in Raipur melt 80-90% sponge iron to produce Ingot/Billet and rest is Pig iron & Scrap.

As per standalone ingot/billet producers in Raipur, currently they are running mills under loss as conversion spread is lower than the minimum required. Present conversion spread of Billet makers is about INR 11,000/MT from Sponge P-DRI. While the minimum conversion spread between the two is about INR 12,500-13,000/MT, as reported by mill owners. In mid of August, the conversion spread was around INR 11,500/MT.

Today the billet prices in Raipur reported at around INR 36,000-36,200/MT and Sponge P-DRI at INR 25,000-25,200/MT, both are ex-plant & excluding 18% GST.

Other raw material prices have also increased sharply – Silicon manganese (60-14) is traded quite high prices at INR 68,000-69,000/MT, Pig iron prices continue to rally and are evaluated at INR 31,800-32,000/MT. Further melting scrap prices are hovering at INR 30,000-31,000/MT. The prices are ex-works, Raipur & excluding GST.

However, the margins from P-DRI to Billet in other major sponge markets remained quite supportive and are assessed at INR 13,000-13,500/MT in Durgapur & INR 12,000/MT in Odisha.

In context to conversion in Scrap based markets, where the Billet manufacturers taking about 80% scrap proportion, conversion spread is hovering at INR 10,000/MT in Mumbai, INR 11,500/MT in Chennai & INR 8,500-9,000/MT in Ahmedabad from HMS scrap (80:20) to Billet.

Conversion Table (in INR/MT)

Source: SteelMint Research