The conversion spread (margins) from induction furnace (IF) route steel billets to wire rod witnessed an increase of 3% in Raipur, central India, while the same decreased by 3% in Durgapur, eastern India, m-o-m, in October, SteelMint’s assessment shows.
On a monthly basis, the average conversion spread was recorded at around INR 4,076/t in Raipur and INR 3,469/t in Durgapur in October.
In terms of IF-route wire rod – Raipur and Durgapur markets are the major supply centres for the various regions across the country. The total daily wire rod production capacity of these two markets stands at around 20,000 tonnes (t).
However, currently a few key suppliers have either halted or adjusted production or shifted to commodities to get better margins compared with wire rods.
Wire rod trades, price movements
Trades and buying enquiries: Wire rod purchase enquiries and transactions in the spot market were limited. Due to the festive season, the markets were almost closed and buyers stayed away from procuring bulk material especially during the first and last week of the month, which resulted in low tradable quantities of 42,500 t recorded by SteelMint throughout the month – a decrease of 13,500 t as against September.
Buyers only made needs-based purchases. Uncertain market trends and highly volatile prices of semi-finished steel in key markets turned buyers cautious who bargained hard to procure material at lower prices. However, Raipur-based manufacturers tried to keep prices high to derive profist, which resulted in inventories getting piled up.
Meanwhile, mills in Durgapur marginally compromised with profit margins compared to competitive markets in order to liquidate material.
Price movements: The average trade prices of wire rods were recorded at INR 51,650 and INR 50,800/t in Raipur and Durgapur, respectively, in October, which were almost stable in both markets as against the previous month.
Manufacturers were able to manage any sharp fall in prices as they knew it was hard to attract buyers in this weak market sentiment. So, to avoid losses they preferred to maintain profit margins mainly in the Raipur market.
Bulk trades were lacking owing to the festive holidays and dull export enquiries which led to the profit margins of manufacturers fluctuating.
Outlook: Market participants are expecting that demand and trades will improve in the wire rod market owing to a favourable working environment in November and the conversion spread is likely to remain supported in the coming weeks.
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