The conversion spread (margins) from sponge iron to billets surged by 6% in Durgapur and about 8% in Raipur m-o-m in Oct’21, while in Sept’21 this was at 2-6% across both locations.
The monthly average conversion from sponge P-DRI to billets in Raipur (in central India) stood at around INR 13,100/t and in Durgapur (eastern India) at INR 13,800/t during October 2021, as per data maintained with SteelMint.
Yesterday, (1 Nov’21), the conversion was recorded at INR 13,150/t in Raipur and at INR 14,100/t in Durgapur.
Reasons behind this surge
SteelMint learnt, sponge iron prices in Raipur hit an all-time high to INR 35,500/t exw during October. A rally in coal prices continued to boost sponge iron and billets prices in the first half of Oct’21.
However, in the second half of October, the buying interest for semi-finished products as well as in sponge iron remained limited, resulting in weakened demand. A sharp fall in coal prices has made sponge manufacturers hold back their offers in expectation of a further price correction.
Analysis
The monthly average prices of billets rose by INR 4,800-5,000/t in Durgapur and Raipur, Meanwhile, the monthly average prices of sponge iron also increased by INR 4,000/t in both the locations, during October 2021. Thus, a sharp surge in billet prices compared to sponge iron, boosted the conversion of billet makers in October.
Outlook
Prices of sponge iron and billets are likely to remain volatile due to falling coal prices and expectations of subdued demand. This may result in slight fluctuations in the conversion in November.
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