India: Limited production pulls up rebar conversion spreads by up to 8% in Apr'21

Rebar, which is one of the major commodities in finished long steels and contributes the maximum production volume, showed an improved conversion percentage on a monthly basis.

Conversion spreads as margins of rebar steel manufactured via the induction route, and which uses billets as a raw material, increased by up to 8% month-on-month (m-o-m) in Apr'21. However, the conversion spread has varied across regions, as revealed the data maintained with SteelMint.

The central region of India captured the maximum share at 8%, i:e,; INR 4,162/tonne (t) in Raipur. This was followed by the western region which moved up by 3% or INR 6,054/t in Jalna which is also one of the highest spreads among major regions. The southern region advanced by 7% or INR 4,868/t in the Chennai market.

On the contrary, the eastern region witnessed a marginal drop by 3% at INR 4,709/t in the Durgapur market but which is adequate for rolling purposes said trade sources.

Factors behind improved conversion spread in Apr'21

Lockdown: The pandemic scenario has impelled state governments to announce lockdowns over the last month to control the rising covid cases which have resulted in retail markets largely getting affected, having to close counters. End-users do not have any avenues for procuring finished steel.

As most of the retail markets have closed across various states, procurement options for traders who largely supply to these retail counters have become highly restricted too.

Curtailed production: Production has been impacted in most states because of the diversion of oxygen for medical usage. Limited supply has been preventing price corrections.

The sufficient gap between blast furnace (BF) and induction furnace (IF) rebar prices has also supported construction steel price trends since construction activities have not been as heavily affected as the retail market.

SteelMint's assessment shows that the average rebar price in Raipur for Apr'21 was recorded at INR 45,554/t, on a m-o-m basis an increase of 7% as against INR 42,532/t in Mar'21. This was followed by Jalna at INR 49,550/t and Durgapur at INR 46,413/t, both showing an increase of 6% as against INR 46,740/t and INR 43,844/t seen respectively in Mar'21.