The conversion spread (margins) from induction furnace (IF)-route mild steel billets to rebar fell by 20% (INR 900/t) in central India’s Raipur and a decrease of 7% (INR 200/t) was reported in Durgapur, eastern India, m-o-m in July 2022, SteelMint assessment shows.
On a monthly basis, the average conversion spread was recorded at around INR 3,500/t in Raipur and INR 4,000/t in Durgapur in July.
Demand for rebar was moderate throughout the month in July due to which most re-rollers cut production in Raipur, while in Durgapur mills had a better spread.
Further, a few hot charging mills in Raipur halted production due to lower margins from billet to rebar and were offering semi-finished products in the spot market owing to better demand in Jaipur and Mandi Gobindgarh.
Meanwhile, the Durgapur market slight raw material shortage i.e. sponge iron and less utilization of melting scrap due to cost concern along with marginal increase in electricity charges i.e. high production costs, which kept steel prices slightly higher despite low finished steel demand.
Blast furnace route rebar prices decreased by around 3% m-o-m. The key factors which slow down prices could be less demand amidst pilling inventories due to monsoon time. The current prices of BF route rebar prices INR 57,000 (12-32 mm) Exy Mumbai.
Factors impacting rebar margins, trade
High raw material prices: Steel billet prices rose by around 6% and 8% m-o-m on average basis in Raipur and Durgapur markets, respectively.
Prices rose on surge in raw material prices due to supply tightness in the sponge iron market along with constant surge in fuel prices amidst non-renewal of fuel supply agreements for linkage coal auctions by CIL.
Limited trade enquiries: Buying enquiries and transactions in rebar in the spot market were witnessed slow due to high prices comparatively in June. Higher raw material prices induced re-roller to cut down their margin mainly in Raipur market. High volatility in semi-finished prices amid uncertain trends created fear among retailers to book bulk volumes despite offering high discounts by trader/re-sellers.
Production cuts: Productions cuts and maintenance shutdown took place due to low trade enquiries amidst less conversion margins particularly in Raipur. A few large-scale steel units were offering semi-finished products in the spot markets because of viability concerns in other neighbouring markets.
Outlook:
Rebar prices are expected to see slight improvement in mid August with improvement in trade enquiries. Sales volume may improve on re-starting of construction activities.
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