The conversion spread (margins) from sponge iron to billets surged by 5% in Raipur and about 6% in Durgapur m-o-m in Feb’22, while in Jan’22 the conversion spread dipped by 1% across both locations.
The monthly average conversion from sponge P-DRI to billets in Raipur (in central India) stood at around INR 13,600/t and in Durgapur (eastern India) at INR 14,400/t during Feb’22, as per data maintained with SteelMint.
Yesterday, (1 Mar’22), the conversion was recorded at INR 14,300/t in Raipur and at INR 16,300/t in Durgapur.
Reasons behind this surge
In the first half of February, the buying interest in semi-finished products and sponge iron remained limited, resulting in weakened demand.
However, in the second half of February, SteelMint learnt, billet prices in Raipur hit an all-time high at INR 51,600/t exw. A rally in raw material prices (iron ore, pellets and coal) continued to boost sponge iron and billets prices in the second half of Feb’22, resulting in rising margins.
The monthly average prices of billets rose by INR 2,750-2,950/t in Raipur and Durgapur. Meanwhile, the monthly average prices of sponge iron also increased by INR 1,950-2,250/t in both the locations, during February 2022. Thus, a sharp surge in billet prices compared to sponge iron, boosted the conversion of billet makers. Billets demand was also stagnant with moderate demand in finished steel in the domestic market.
Outlook
Sources assume that due to higher raw material prices — iron ore, pellets and coal — sponge makers may push to keep prices strong to maintain their margins. Similar trend may be followed by billet makers in terms of price movements and this may help to maintain the coversion in March.
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