The conversion spread from induction furnace (IF)-route steel billet to rebar fell by 20% in central India’s Raipur, while margins sunk by around 17.5% m-o-m in eastern India’s Durgapur market in August, SteelMint assessment shows.
On a monthly basis, the average conversion spread was recorded at around INR 2,800/t in Raipur and INR 3,300/t in Durgapur in August for 10-25 mm, Fe 500 grade rebars.
Raipur and Durgapur are the major markets supplying to different regions across the country. The daily rebar production capacity of these two markets combined is around 25,000-28,000 tonnes (t).
Demand for rebar in August remained moderate in Raipur and Durgapur. Meanwhile, to maintain supply-demand balance, a few mills cut down production while a few others took maintenance breaks due to limited demand and shrinking margins.
In addition, a few hot charging units, especially in central India, shifted to selling other commodities such as billets due to better margins and to minimise operating expenses.
Blast furnace-route rebar prices fell slightly m-o-m owing to the lack of buying inquiries and slow material movement amidst inventory build-up. Current prices of BF rebar are at INR 56,300/t (12-32 mm) exy-Mumbai.
Trades and buying inquiries: In August, spot buying inquiries and trade volumes remained moderate on account of monsoons and floods in many states. Around 50,000 t of deals were recorded by SteelMint in Raipur last month.
Further, amid limited demand, inventories piled up despite many mills utilising only half their capacity. Only 60-70% of dispatches were heard done till the middle of the month thereby increasing sales pressure on suppliers, as per sources.
Moreover, the standalone re-rolling mills were under pressure due to high prices of raw materials such as steel billets. Average billet prices in Raipur was assessed at INR 48,900/t in August as against INR 49,300/t in July. Rebar prices fell slightly more compared to billets.
Price movement
Average trade prices of rebar in Raipur fell by 2% to INR 51,744/t in August, while in Durgapur prices slipped 3% to INR 52,278/t. The key factor that can be attributed is lack of demand amidst slowdown in construction activity during monsoon.
Difference between IF and BF rebar prices: The difference between IF- and BF-route rebar prices was approximately INR 3,800/t in July. Due to lack of demand BF-route rebar prices fell by around 2% and the current gap is around INR 1,000/t. Prices are on ex-works Mumbai basis.
Outlook: Trade participants are expecting IF-route rebar prices to remain under pressure in September due to the shrinking gap between BF- and IF-route prices. Buyers may shift their preference toward BF-route rebar due to better quality amidst concerns relating to grades. However, finished products prices are likely to hinge on raw material price movements.
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