- DRI, scrap prices gain sharply on supply constraints
- Billet, rebar prices rise despite selective buying
South India’s steel market strengthened during the week ended 11 September 2026, supported mainly by a sharp rise in sponge iron, pellet, coal and melting scrap prices. Higher input costs increased production expenses across the value chain, pushing billet and rebar prices higher. However, downstream buying remained selective, suggesting that the current rally is largely cost-driven rather than demand-led.
Sponge iron and melting scrap
Sponge iron prices in Bellary increased by around INR 1,100-1,200/t w-o-w to around INR 30,700/t as on 11 September. The price rise was mainly driven by higher raw material costs, coupled with a supply shortage in the market, which supported sponge iron prices amid firm buying interest from steel mills.
Pellet prices in the Bellary cluster also increased by around INR 500-600/t w-o-w, with prices assessed at around INR 11,450/t as on 11 September. The increase was primarily attributed to improved demand from sponge iron manufacturers, while relatively tight availability further supported market sentiment.
Coal prices also moved up by around INR 500-600/t w-o-w, with RB2 (5,500 NAR) prices currently hovering around INR 13,150/t ex-Vizag port basis as on 11 September. The increase was supported by tighter supply, higher global energy costs and firm demand from the steel sector.
In Chennai, HMS (80:20) scrap prices strengthened by INR 1,000/t w-o-w to INR 34,300/t on 10 September. The increase was mainly attributed to supply constraints, as mills were unable to meet their daily raw material requirements. This prompted buyers to procure material at higher levels from scrap suppliers amid improved demand for semi-finished steel.
Import scrap trading in Chennai remained active for selected grades, although a notable bid-offer gap persisted in the market. Market participants reported that Australia-origin shredded scrap was offered at around $380-382/t CFR Chennai, while HMS (80:20) was quoted at around $350-352/t CFR Chennai.
Billet
Semi-finished steel prices in south India market increased by around INR 1,500-2,000/t w-o-w, supported by a sharp rise in key raw material prices, particularly sponge iron and melting scrap. The increase in input costs has pushed up the overall production cost for billet manufacturers, prompting suppliers to raise their offers to protect conversion margins. Buying activity remained relatively firm, allowing producers to pass on the higher production costs to buyers.
As of 11 September, MS billet prices were assessed at around INR 44,000/t in Hyderabad and INR 48,000/t in Chennai. The rise in billet prices was primarily cost-driven, with higher sponge iron and scrap prices providing a strong floor to the market. Despite the price increase, buyers continued to procure material selectively, particularly where immediate requirements and specific grade specifications were involved.
In Chennai, the conversion margin from HMS (80:20) scrap to MS billet was assessed at around INR 13,700/t, showing a slight improvement from the previous week. Meanwhile, a few billet transactions were concluded from Chennai to neighbouring Karnataka markets, mainly involving specific lengths and grades. Market participants indicated that such inter-regional trades were supported by demand for specific material specifications, although overall buying remained selective amid higher price levels.
Rebar
Rebar prices increased by around INR 1,500/t w-o-w, mainly supported by the sharp rise in billet prices. Higher billet costs have prompted rebar manufacturers to increase their offers to maintain conversion spreads and protect margins. Although demand remains decent, buying activity is not aggressive, particularly for bulk quantities, as buyers continue to adopt a cautious approach at elevated price levels. Induction-route rebar prices are currently hovering around INR 50,000-51,000/t in the Hyderabad region.
Mill-level inventories are currently estimated to be around 20-30% higher than normal levels, reflecting relatively comfortable availability of finished steel. Despite carrying higher inventories, some manufacturers continue to offer billet in the merchant market, likely to balance their inventory positions and maintain cash flows. This has resulted in selective billet availability in the market, although producers remain cautious about increasing finished steel output aggressively.
Blast furnace (BF)-route rebar prices also strengthened by around INR 1,000-1,500/t w-o-w across the Chennai and Hyderabad markets.
The price gap between BF-route and induction-route rebar is currently hovering around INR 9,000/t in both Hyderabad and Chennai.
Outlook
Steel prices in the southern region are expected to remain firm in the coming days, particularly after Ganesh Chaturthi, as finished steel demand is anticipated to improve. Market participants expect construction and infrastructure activities to gain momentum as the festive period concludes and monsoon conditions ease. The expected improvement in demand, along with higher raw material and semi-finished steel prices, is likely to support finished steel prices. Steel market participants remain optimistic about the near-term outlook, although buyer resistance at elevated price levels will remain.
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