The conversion spread (margins) from induction furnace (IF) route steel billets to wire rod witnessed a marginal m-o-m drop by 1% in Raipur, central India. In Durgapur, eastern India, the market declined by 8% in July, SteelMint assessment shows.
On a monthly basis, the average conversion spread was recorded at around INR 4,398/t in Raipur, marginally falling by 1% and INR 4,279/t in Durgapur, dropping by 8%, as against June.
Notably, for IF route wire rod, Raipur and Durgapur are the major supply centres in the country. As per data maintained with SteelMint, total daily production capacity of these two regions stands approximately at 20,000 tonnes (t).
However, since the past few months some of the mills are not utilising their full capacity. A few mills mainly in Raipur have shut down their facilities and shifted to selling other commodities in which they get better margins as compared to wire rod.
Trade dynamics
Trades and buying enquiries: In July purchase enquiries and transactions in the spot market were moderate. Around 63,000 t of tradable quantities were recorded by SteelMint throughout the month, the quantity reduced by 5,000 t as against the previous month.
In terms of trades in the spot market, mill owners witnessed adequate bookings during the beginning and July-end and prices were also on rising trend and even some mills were overbooked by which delay in dispatch from mills have also been noticed.
However, lack of buying enquiries and low trade volume on higher prices in mid of the month as spotted, which led towards fall in prices by manufacturers according to the movement of raw material cost, availability of material in yard and competitive prices in other markets.
Along with this monsoon rainfall in the country is also a factor which hampers the consistency in booking volume and slows down the trades as buyers were cautious to book hefty volumes throughout the month, SteelMint learned.
On the other side end-user industries of the finished product, like galvanized wire(GI wire), barbed wire, binding wire industries who used wire rod and HB wire as a raw material observed weak buying enquiries throughout the month, specifically GI manufacturers and their production also reduced.
Price movement in July: In July, 2022 the average trade prices in wire rod increased by 5.6% to INR 53,692/t in Raipur and up by 7% to INR 50,793/t in Durgapur market, as against June,2022. Increase in prices were impacted by factors like, many integrated mills have adjusted the production in various grades and sizes of wire rod by which there was a short supply in market and the prices were on higher side despite lack of trades on higher prices of wire rod.
In terms of export, the imposed export duty of 15% in wire rod has made exports unviable, therefore mills were more dependent in the domestic market for trades and this also a factor which prompts to adjust the production and keep prices according to demand and supply in the domestic market and to maintain the margins.
All such trade dynamics like seasonal rainfall, fall in production of end users industries, higher prices and dull export enquiries led towards a falling margins of wire rod in July.
Outlook: Trade participants are expecting that wire rod trades to remain moderate, and price movements will be highly dependent on raw materials and by adjusting production the conversion spread is expected to fluctuate by up to 10% in the near term.
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