In Raipur and Durgapur, the conversion spread from sponge iron (PDRI) to billets increased by 8% and 2%, respectively in September 2022. In contrast, in both sites the conversion spread in August had fallen by 6%.
SteelMint data shows that in September, the average monthly conversion spread from sponge P-DRI (pellet-based DRI) to billets in Raipur and Durgapur was approximately INR 15,350/t and INR 15,744/t, respectively.
On October 4, the conversion rate was determined to be INR 16,500/t in Raipur.
The conversion rate was INR 16,100/t in Durgapur on 1 October, 2022, as the market was closed today amid festivities (Durga Puja).
Note – Above mentioned Durgapur prices are of 1 October, 2022.
What made the margins rise?
During September, domestic sponge iron prices fell sharply while billets prices remained stagnant. Market participants were under a lot of pressure in September as a result of falling steel prices. Due to the modest demand for finished steel, the market struggled as it attempted to stabilise.
In addition, September saw weak demand due to the festivities, which had an impact on trading activities. Following the same, standalone furnaces also capped production, which put additional pressure on sponge iron and supported the billets market.
As a result, the conversion of billets makers was boosted by a substantial drop in sponge iron prices relative to billets pricing. With a modest demand for finished steel in the domestic market, demand for billets likewise remained unchanged.
Price overview
- In Raipur and Durgapur, the monthly average price of billets fell marginally by INR 1,200-1,350/t in September 2022.
- While on the other hand, during September 2022, both locations reported a considerable decrease in the monthly average sponge iron prices by INR 1,700-2,300/t.
Outlook
The conversion spread of billets makers will likely remain slightly changed in October considering the ongoing festive season which may keep domestic steel demand subdued.
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