Mining News Pro - Indian induction furnaces conversion spread (margins) slumped near about INR 3,500-4,000/MT (USD 50-58) in last one month due to sharp fall in billet prices amid stability in sponge iron due to seasonal factors. Likewise the margins of Ingot/Billet producers also hit 3 month`s low, as per data maintained by SteelMint.
As per data, at current prices of Sponge P-DRI and Billet (Induction grade) in Raipur-Central & in Durgapur-East India, conversion spread hovering is at INR 12,500-13,000/MT (USD 181-189) which on an average is around INR 15,000-17,000/MT (USD 218-247) during Apr-June`18.
Similarly, spread between Scrap and Billet stands at INR 8,000-10,000/MT (USD 116-145) against an average of INR 1,200-1,400/MT (USD 175-203) during Apr-June`18.
India`s 22-24% of steel are produced through induction route by the medium & small scale producers. India`s crude steel production surge by 5% year-on-year in FY18 and stood at 102.3 MnT.
Meanwhile as the margins are poor, the market participants are anticipating, prices of Ingot/billets should hold on, however if do not happen the producers may opt to production cut to balance demand-supply and margins as well.
Reasons behind reduced conversion!
Improved supply: The market participants stated, Ingot/Billets & Rebar supply improved in the merchant market with the start of monsoon as mills getting full-fledged power supply.
Raigarh - which is one of the major merchant supplier of Ingot/Billets in Central & North-east regions, the manufacturers here have resumed production to 100% after a gap of 2 months, this has led to over supply of Ingot/billet in the respected markets.
Limited spot trades: As the monsoon brings in India, demand for across long steel products negatively affected, this has led to weak demand for billet & sharp fall in prices.
As per industry sources, demand from infrastructure & end user segment reduced to 50-70% than the previous months.
Stability in Sponge market: Sponge iron prices are more or less firm since the Billet prices are falling. As per sponge producers, there is no major stock with them and bookings are continuous on expected seasonal shortage and surge in prices.
Limited exports: Indian export demand limited since a month duration and specifically for Billets & Wire rod.
Nepal which is the major buyer of Indian Billets & Wire rod, has currently halts healthy bookings due to closing of Nepalese financial year and ongoing monsoon season in the nation which made poor demand for finished products.
India`s major exporter of Billets - Vizag Steel, also known as RINL, had cancelled its export tenders twice for Nepal due to low bids. On an average, Nepal accounts near to 40% of total billet exports from India.
