The conversion spread from sponge iron to billets rose by 2% in Raipur and 5% in Durgapur in July. However, the conversion dropped 12% in both the regions in June.
The monthly average conversion spread from sponge P-DRI (pellet based DRI) to billets in Raipur stood at around INR 15,238/t and in Durgapur at INR 16,383/t last month, as per data maintained with SteelMint.
Today, (1 Aug’22), the conversion was recorded at INR 14,750/t in Raipur and INR 15,200/t in Durgapur.
Reason behind the increasing margins
Seasonal supply shortage
Seasonal supply shortage for sponge iron which continued to support sponge iron prices in July. This continued for a while due to scarcity in deliveries of sponge iron. This also pushed billet producers to quote higher prices.
Increased power cost
SteelMint learned that the power cost in Durgapur has been increased by Rs. 70-75 paise per unit, which ultimately increased the production cost and hence, suppliers started to offer prices on a higher note.
Price Overview
- The monthly average prices of billets rose by INR 2,900-3,900/t in Raipur, and Durgapur during Jul’22.
- Similarly, the monthly average prices of sponge iron reported a rise of INR 2,650-3,100/t in both the locations during Jul’22.
Outlook
Prices of sponge iron are most likely to remain strong due to active demand and seasonal low productivity
As a result, the margins of billet makers are likely to remain stagnant.
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