India: IF-route wire rod conversion spread surges 41% in Oct'21

The margins for converting billets into wire rods (also called conversion spread) surged by 39% and 41% in Raipur and Durgapur respectively in Oct'21, as per SteelMint's assessment.

The monthly average conversion spread was at around INR 4,350/tonne (t) in Raipur and the same was at around INR 3,735/t in Durgapur throughout the month. However, in Sept'21, the spread dropped by 3% in Durgapur whereas, in Raipur it increased by 4%, m-o-m.

Yesterday, (2 Nov'21), the conversion has been recorded at INR 3,400/t in Durgapur and at INR 4,100/t in Raipur.

Analysis

The wire rod conversion spread shot up as the rebar gauge parity was revised in both the locations during Oct'21.

IF-route finished long mills increased the dia difference so as to maintain the gap between rebar and wire rods. Thus, with the rise in rebar prices, the re-rollers also maintained prices on higher ranges of wire rods despite low buying interest as most of them had held their buying position.

SteelMint also noticed that very less trades were happening with a limited quantity.

What may happen?

It is expected that conversion of re-rollers will likely dip in November as demand remains stagnant at prevailing offers, while stock positions are up to the mark in a few major markets.