The conversion spread (margins) from sponge iron to billets increased a slight 2% in Raipur but by a sharper 6% in Durgapur m-o-m in Sep’21.
As per data maintained with SteelMint, the monthly average conversion spread from sponge P-DRI to billets in Raipur (central India) stood at around INR 12,072/tonne (t) and in Durgapur (eastern India) at INR 12,977/t in September.
On 1 Oct’21, the conversion was recorded at INR 13,100/t in Raipur and at INR 13,700/t in Durgapur.
Why did it happen?
SteelMint learnt that a surge in coal prices and an improvement in demand for finished steel with the expected withdrawal of the monsoon in late-September have kept billets prices supported. Thus, with a sharp surge in prices, the margins improved.
Analysis
During September, the monthly average prices of billets dropped by INR 400-600/t in Durgapur and Raipur, while on the other hand, there was a correction in sponge iron prices by INR 800-1,100/t in both the locations.
What may happen?
Sources feel that suppliers are keeping prices high following improved demand in finished products. Prices of sponge iron are most likely to remain strong due to higher coal prices, active demand and lower production volumes.
As a result, the margins of billet makers are likely to remain stagnant.
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