The majority of hot rolling mills in Raipur have confirmed SteelMint that they have curtailed output by over 30% in the last 15 days. These mills contribute 20-30% of finished steel production of the secondary mills in Raipur.
Hence, with a fall in finished steel & billet output, sponge iron demand weakened considerably as no bulk bookings have been reported by the mid-sized sponge plants. This led to drop in sponge iron prices by INR 1,000/t ($14), w-o-w in Raipur.
On average, the hot rolling mills or standalone furnaces required conversion of INR 11,000-12,000/t, which is hovering at INR 10,000/t from Sponge P-DRI to billet.
As per producers, they are etching losses of over INR 1,000/t to produce or sell billets in the spot market, analysing the current price of sponge iron. Also, due to dull finished steel demand, they have slowed down their operations to improve margins but are still unable to achieve the targeted conversion.
Recently, the Raipur based rolling mills held rebar offers for five days, which resulted in a slight improvement in conversion by INR 500-1,000/t to INR 3,000/t from billet to rebars (12 mm). However, sponge to billet conversion remained under pressure, leading to a drop in production.
What may happen?
- Sources believe that sponge iron prices may soften until there is an improvement in furnaces’ production as well as margins. However, if the scarcity of raw material arises, sponge iron makers may keep their prices strong.
- However, rebar makers’ conversion spread is expected to fluctuate marginally on account of tight supply.
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