BIFA (Bhavnagar Induction Furnace Association) and associate members in a meeting today have decided to shut operations for couple of days on weekly basis to match supply-demand gap as strong supply & limited demand has put conversion spread(margins) under pressure.
Bhavnagar is considered one of the major producer of Ingot/Billets in Gujarat – Western India, where close to 70-75 small scale mills (furnace) are based whose monthly installed capacity is near to 1,50,000 to 2,00,000 MT.
The proposed meeting was planned prior 3-4 days back with an outcome of firm step to maintain the conversion spread from Scrap to Ingot/Billet which is being disturbed from last couple of months as the market is best known as scrap based, located near to one of the world’s largest ship breaking yard in Alang situated around 45-50 Kms from Bhavnagar.
Presently the conversion spread from melting scrap to Ingot/Billet in Bhavnagar is hovering at INR 5,500-6,000/MT which should be not less than of approximately INR 7,000/MT, as stated by furnace owners.
Factors which have lowered conversion spread –
Less availability of Scrap: Limited ship breaking scrap generation led to tight supply of scrap and furnace owners had to procure scrap at wide range and Semi’s (Billet) price range were narrowed down by around INR 1,600/MT in a month, whereas scrap fell in just half i.e. by INR 800/MT.
Limited Ships arrived in Alang, which is being observed as measured process and most of the yards offering with higher prices as per sources.
Weak Billet exports: Gujarat is one of the major Billet exporter to the South east nations, however amid lower offers from Iran, Turkey and CIS, the mid sized mills in Gujarat is unable to proceed exports and largely selling material in local market which in turn improved supply in domestic market, although demand remains same (weak) in Indian market.
Poor off take in finished products: Demand in finished products continued to remain weak since more than a month as elections in India has disturbed payment cycle in project segment and allocation has remained low, this has resulted in falling demand for Semis products too.
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