Conversion spread (margins) for induction furnace steel producers from billet to wire rod rose marginally by 6% in Raipur, central India, and 1% in Durgapur, eastern India, on a monthly basis in April, 2022, SteelMint assessments show.
On a monthly basis, the average conversion spread was recorded at around INR 4,900/t in Raipur and INR 4,475/t in the Durgapur in April.
Raipur and Durgapur are major supply centres and, as per data maintained with SteelMint, daily IF wire rod production in these two regions stands, approximately, at 10,000-11,000 t and 6,000-7,000 t, respectively.
However, a few integrated mills especially in the central region either reduced production or shifted to other commodities in the hope of garnering better margins compared to wire rod.
Trade dynamics & margins
Moderate trades, buying enquiries: In April, enquiries and transactions in the spot market remained moderate, which prompted producers to raise prices in order to ensure margins. However, high volatility was observed in semi-finished steel prices and weak market sentiments and uncertain trends created fear among traders as regards bulk procurement. In order to liquidate material, resellers offered trade discounts of up to INR 2,000/t.
Mill owners didn’t experience any selling pressure and adjusted their offer prices according to the movement of raw material prices and to offset the heavy discounts offered by the traders.
On the other hand, end-user industries of finished products such as galvanised wire, barbed wire and binding wire that use wire rod and HB wire as raw materials also saw moderate trades in the market and actively procured material from time to time as per requirements, which kept wire rod prices and margins supported.
Volatile raw material prices: The market remained highly volatile in terms of raw material prices in April and factors such as geopolitical issues, shortage of coal and power cuts influenced trades and pricing of wire rod. Bulk trading declined due to higher prices and so manufacturers adjusted trade prices that, on average, decreased by 1.5% to INR 60,820/t in Raipur and fell by 2.7% to INR 60,380/t in Durgapur.
Dull export enquiries: India’s exports to Nepal of both IF route and BF route wire rod stood at 10,028 t in April, down 21% m-o-m. The mills did not get adequate support from the global market and remained highly dependent on domestic sales to maintain margins.
Outlook
Trade sources are expecting wire rod prices to be driven by raw material price movements and trades are likely to be impacted on higher prices or slow procurement may be observed in May and, therefore, a sharp increase in prices is unlikely.
Further, a downward price correction is also expected and conversion spreads are expected to remain rangebound, trending at around 5-10% (1%+/-) in the near term.
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