India: Sponge based Furnaces increase Production over Scrap based

Sponge based Induction furnaces increase production on better margins, whereas Scrap based furnaces remain under pressure.

Rising conversion in Sponge iron & MS Ingot has made Sponge based induction furnaces to increase their production. These units are largely located in India’s eastern region.

It was assessed that with increasing supply of Pellet based Sponge (P-DRI), margins have improved for induction furnaces in Chhattisgarh, Jharkhand & Bengal. Speaking to Ingot/Billet manufacturers, it was noted that they have increased their production by at least 20%.

On the other hand, furnaces based on Scrap have cut down their production on higher Scrap prices.

Considering Mumbai (Scrap based) and Raipur (Sponge based) as base, we have tried to highlight the increasing conversion gap from Sponge to Ingot and decreasing gap from Scrap to Ingot. 

Conversion of Scrap/Sponge to MS Ingot (Jan-Jul, 2014)

Note: Scrap considered HMS 80:20; Sponge FeM 80
Prices are till 09 Jul, 2014

MS Ingot to TMT Conversion (Jan-Jun, 2014)

Note: Re-bar 12 mm
Prices are till 09 Jul, 2014

Mumbai based MS Ingot manufacturer said, “We require at least INR 7,500-8,000/MT conversion spread to produce 1MT of MS Ingot from HMS (80-20) Scrap. However from past many months, market does not support the standalone furnaces. Almost 2-3 furnaces have already been closed in past few months. If the same scenario continues, we may see further closure of plants”.

Furnaces based in Wada (Mumbai) purchases Sponge iron from Bellary and imported Scrap for melting purpose. Sponge iron (FeM 78) is being offered at INR 23,300-23,600/MT, FOR Wada and imported HMS Scrap (80:20) at INR 25,500-26,000/MT. MS Ingot has been sold at INR 31,900/MT and Re-bar (12 mm) at INR 35,400/MT.

Price gap between Raipur & Mumbai for MS Ingot is at around INR 600/MT; earlier in mid-April, it was at INR 2,500/MT.