Conversion spread (margins) of Indian induction or EA furnaces have increased by INR 2,000-2,500/t($ 14-21) since May’20.
According to the industry participants, the benchmark conversion required is about INR 12,000/t from sponge P-DRI to Billet which is currently around INR 13,000/t in Raipur & INR 12,500/t in Durgapur.
Factors behind rise in conversion spread:
— Sponge production is running in full-fledged manner compared to billet, as limited manpower is required in the sponge iron making process as compared to billet.
— Strong rebar demand earlier has forced producers to consume more billets for captive use rather than selling in the spot market. This led to limited supply in the merchant market and in turn supported price range & conversion as well.
— Billet export from Indian market is good in comparison to sponge due to lockdown & limited capacity utilization in neighboring nations i.e. Bangladesh & Nepal.
Current offers
The current price of Sponge P-DRI is hovering at INR 15,500/t (FeM 78) in Durgapur & INR 15,000/t (FeM 80) ex-Raipur. Meanwhile billet trades are reported at INR 27,700-27,800/t in Durgapur & INR 28,000/t ex-Raipur, size 100*100 mm & commercial grade.
What may happen?
Indian sponge iron offers are less likely to fall further as a majority of furnaces have started operations which may result in increase in demand in the coming days. In addition to this seasonally low productivity of sponge may support the price range.
Market players are anticipating further price fluctuation in sponge iron, but arrival of monsoon may result in increased offers soon on the backdrop of low production and seasonal logistic issues, shortage of raw material (iron ore & coal).
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