India: Wire rod producers’ margins decline for the third month in a row in September

The margins (conversion spread) of wire rods producers dropped slightly by 1% m-o-m in Raipur, Chhattisgarh and 4% in Durgapur, West Bengal in September. The average spread stood at around INR 3,958/t in Raipur and INR 3,586/t in Durgapur. This is the third month of decline in margins, as per SteelMint records.

Raipur and Durgapur are the major supplying centres of IF-route wire rods in India. Cumulative production capacity in these two regions stands approximately at 20,000 tonnes (t) per day.

However, due to lower margins, some mills have not been running at their full capacities since the past few months. In Raipur, some mills have even halted their production and shifted to selling other commodities.

Trade dynamics –

Wire rods purchase enquiries and transactions in the spot market were moderate in September. Deals of 56,000 t were recorded by SteelMint in the month under review, up by 3,650 t compared to August.

Mill owners and resellers saw need-based buying enquiries last month. Due to uncertain market trends and highly volatile prices in semi-finished steel in key markets, buyers bargained hard to procure the material at lower prices, leading suppliers to offer attractive discounts as per available stock.

Besides wire rods, demand of other finished long steel products like rebars and structural steel was also moderate with buyers being cautious. This also impacted demand of wire rods and its end-products like binding wire, GI wire, and barbed wire.

Price trend –

The average trade prices of wire rods decreased by 2.3% to INR 51,623/t in Raipur and by 2.8% to INR 51,269/t in Durgapur, on m-o-m basis, in September.

Manufacturers tried to keep offers on the higher side but weak response from buyers led them to lower offers, compromising with their margins.

In addition, lack of bulk trading and dull export enquiries also weighed on margins.

Outlook

Trade participants expect that the margins of wire rods producers are likely to fluctuate (by +/-5%) in the near term considering subdued demand during the festive season.