State-run Steel Authority of India’s (SAIL’s) flagship unit, Bhilai Steel Plant (BSP), located in Chhattisgarh, recorded sales of defective steel (secondary steel) or “re-rollable steel” from auctions at 415,807 tonnes (t) in financial year 2021-22 (FY22), data collated by SteelMint shows. The volumes declined by 32% compared to 607,901 t sold in the previous fiscal.
The material auctioned is mixed in nature comprising CC blooms, billets, plates, TMT bars, rails and also steel scrap. Secondary steel sales usually make up about 3% of SAIL’s consolidated annual revenues.
Sales down on lesser scrap generation
The significant drop in defective steel sales was largely because of lesser generation of the material in FY22 compared to the previous fiscal year. As a result, the company offered low volumes of defective products for sale.
Highlights
- Highest sales in May: The highest sales volume was seen in May, 2021 at around 51,602 t at an average bid price of around INR 38,283/t exw. Further, the company’s management had cancelled a few auctions in the previous month, the volumes of which were subsequently added in the May auctions.
Also, in July, the volumes sold stood at around 42,306 t as demand improved after Covid cases reduced in India and lockdown restrictions were eased.
In December 2021, about 43,744 t of defective steel were sold amid strong demand and higher steel prices.
- Prices shoot up: Interestingly, SAIL’s overall realisations from sale of defective semis spiralled up in FY22 amid strong sentiments in the domestic market.
Prices were on the rise since January, 2022 on the back of elevated scrap prices amidst supply shortage along with supportive semi-finished and finished steel demand in the domestic market.
SteelMint assessed CC defective blooms prices at INR 55,115/t exw in March, 2022 compared to bids at INR 43,820/t at BSP auctions in February, 2022, higher by over INR 11,000/t m-o-m.
LMS ( Light melting scrap) grade scrap prices rose sharply by around INR 14,500/t to INR 44,890/t DAP-Mandi Gobindgarh in March, 2022 from INR 30,400/t seen in the corresponding month last year. Rally in global scrap prices amid container shortage supported domestic scrap prices.
Meanwhile, billets prices were assessed at INR 57,170/t exw-Raipur in March, 2022. In addition, prices of feed materials such as sponge iron have risen over the months.
SAIL’s BSP sells over 0.13 mnt rails
SAIL-BSP sold around 134,600 t of defective rails via auctions in FY22. The material offered comprised 60 kg of rails and almost all the auctions garnered active response from participants.
The highest volume was sold in January 2022 at 26,500 t at an average bid price of INR 40,383/t exw.
Bid prices in the March 2022 auctions were the highest in FY22 at INR 55,350/t exw which largely remained supported by higher scrap prices and rally in sponge and coal prices.
What are defective steel and rails used for?
Secondary steel (defective steel) and rails offered by SAIL-BSP are mostly bought for melting purposes.
Interestingly, the main participants/bidders at these auctions are generally secondary mills from Raipur and the nearby region, who use induction furnaces for producing semis and finished products.
The reason is that Raipur, which is a hub of secondary mills in India, is located far from scrap generating centres, which are mainly the larger cities or regions close to an auto hub like Gurgaon, Ludhiana or Pune, and the local mills are forced to use sponge iron as their main feed.
Hence, there are ready takers for SAIL’s defective products.
Outlook
It is expected that SAIL-BSP may offer around 500,000-600,000 t of defective steel and around 80,000-100,000 t of rail scrap in auctions in FY23.
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