Indian Secondary Steel manufacturers, who contribute about 30-35% in country’s total crude steel production are suffering from high input cost and narrowing down profit margins, which has resulted in many units shutting down operations.
Since last few months, Sponge iron prices have corrected marginally as compared to high price correction in Ingot/Billet & Rebar. This has narrowed the conversion gap as well as the margins for manufacturers, which in turn has also reduced production.
Scarcity of Iron ore and bearish sales of Long steel has affected the conversion gap from Sponge to MS Ingot/ Billet and MS Ingot/ Billet to Rebar in the last few months.
On an average Billet producers desire a gap of INR 9,000-9,500/MT and Rebar makers expect INR 3,500-4,000/MT; which is currently at INR 7,800/MT and INR 2,500/MT respectively.
Secondary steel manufacturers blame higher cost of raw material and poor demand for finished steel. Most of them believe that if similar situation persists for more than a month, lot of units will available for sell out.
Indian Crude Steel Structure
Indian crude steel production in FY14 was 81.5 MnT, out of which about 37 MnT was through Blast furnace route, 19-20 MnT was through Electric Arc Furnace and 24-25 MnT was through induction furnace route.
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