Indian induction furnaces conversion spread (margins) fell about INR 1,000-1,500/MT (USD 14-21) in the last one month due to fall in billet prices and stability in sponge iron owing to rising raw material & substitute products price.
As per data compiled by SteelMint, at current prices of Sponge P-DRI and Billet (Induction grade) in Raipur-Central & in Durgapur-East India, the conversion spread (margins) are hovering is at INR 9,600-9,900/MT (USD 135-140) in Nov’19, which was at around INR 11,000/MT (USD 154) during Oct’ 19. And on a yearly basis it was at INR 12,000-13,000/MT (USD 167-182) in Nov’18.
As per standalone ingot/billet producers in Raipur, currently they are running mills under loss of above INR 1,000/MT as conversion spread is lower than the minimum required. The average required conversion is reported at near to INR 11,000-12,000/MT.
Looking to the poor margins, the participants & mill owners as well are anticipating that prices of ingot/billets should recover, however if it doesn’t happen, the production will suffer to balance demand-supply and margins as well.
Today, the billet prices in Raipur & Durgapur reported at around INR 26,100-26,300/MT & INR 26,800-27,000/MT and Sponge P-DRI at INR 16,600/MT & INR 17,000/MT, respectively, both are excluding 18% GST.
In context to conversion in scrap based markets, where the furnace operators are melting about 80% scrap, the conversion is hovering at INR 6,500/MT in Maharashtra (Mumbai & Jalna) & INR 6,000/MT in Gujarat (Ahmedabad) from HMS scrap (80:20) to Billet. However, on an average spread required at around INR 7,000-8,000/MT as per industry participants.
Thus, anticipations are high that, due to low margins and rising base raw materials, the billet prices should find support. Also rally in scrap & billet prices globally, may support Indian furnace industry resulting in hike in price range.
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