Indian Secondary Steel Manufacturers hit on Low Margin

Indian steel manufacturers, who have been battling with crucial supply of key raw material, Iron ore and now coal, are disappointed because of low conversion spread, which in turn has slumped the profit margin.

Indian secondary steel manufacturers, who have been struggling for raw material, have been hit by low margin and high cost of Iron ore and coal. It is noticed that a lot of secondary manufacturers have reduced their production significantly owing to low margin, which has lowered the inventory level of finished steel.

Currently, in Raipur (Chhattisgarh), conversion gap from Sponge iron (C-DRI; 80 FeM) to MS Ingot is INR 7,500/MT. However, 3 months back, it was at around INR 9,800/MT.

Similarly, conversion gap for making Ingot from Sponge in Durgapur was INR 10,500/MT, which has now fallen by INR 1,900/MT. At present in Mumbai, conversion for making Ingot from Scrap is INR 6,200/MT, which used to be INR 6,400/MT earlier.

In present scenario, construction & real sectors, which are the main consumer of finished steel, witnessing dull sales, which has created liquidity crunch in these sectors. As a result, rolling mill operators are struggling to sale the material in the market. This has led to fall in sale of finished steel as well as increase in inventory level. The production is still below 70% in central & western India.

Conversion Gap from Sponge/Scrap to MS Ingot 

All prices in INR/MT
Source: SteelMint Research