India’s medium & small standalone rebar producers to opt for production cut due to rising inventories on seasonal slow off-take and almost bottom out conversion margins.
Recently, as per the information received from Mumbai, (Western region) & Raipur (Central India) the sources reported that approx 3-5 standalone rebar producers have temporarily halted their operations due to high inventories (that is 3-4 times more than the average inventories maintained by them) and low margins. In each of this mills production is around 5,000-10,000 MT re-bar in month’s duration.
As per the SteelMint’s analysis, conversion spread which was above INR 4,000/MT in Central & East India and INR 3,500/MT in Western region prior to July 2017 has now reduced to below INR 3,000/MT; down by approximately INR 1,000/MT (USD 15/MT).
The standalone mills which require conversion of INR 3,000-3,500/MT on average basis have no option left apart from putting the plant under maintenance till demand gets improved in domestic market and clears the previous stocks with them.
As per recent data released by the Indian Steel Ministry it also observed that domestic Bar and rod production by Medium/small & large producers declined by 7% M-o-M in Jun’17 to 2.90 MnT against 3.11 MnT in May’17.
Note: The conversion spread (margins) considering from Billet to 12 mm rebar reference prices on SteelMint’s daily price assessment basis.
Sources SteelMint Research
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