Conversion spread (margins) of medium and small rebar producers that use billet as an input narrowed by up to 36% m-o-m in Jul’20 in the major producing regions in Central, Western and Eastern India.
Raipur in central India reported a fall of 36% m-o-m in rebar margin, while margins in Jalna and Durgapur in west and east fell by 25% and 34% respectively.
Retail sales of rebar have been pressured due to slow work at construction sites owing to labour shortage and lingering lockdown measures in various cities affecting operational hours of retail rebar sellers. The monsoon season is seasonally sluggish for rebar sales across the country.
What may happen?
— The spread may show some improvement as unlock measures unfold, lifting demand. But with coronavirus spread still quite active in India, there is also the risk of restrictions remaining tight in worst-affected areas.
— Capacity utilization rate of mid-sized mills might observe fluctuation upon region wise and current production levels reported at round 50-60% after dropping by around 5-10% on average in July.
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