India: Rebar producers in Raipur and Durgapur witness slight variation in margins in October

The conversion spread (margins) from induction furnace-origin steel billets to rebar decreased by 6% in Raipur, central India, while the spread increased in Durgapur, eastern India, by approximately 10%, m-o-m, in October 2022, as per SteelMint assessment.

On a monthly basis, the average conversion spread was recorded at around INR 3,550/t in Raipur and INR 3,400/t in Durgapur in October for material of 10-25mm Gr. 500Fe.

Raipur and Durgapur are the major supply hubs in the country. The rebar production capacity of these two markets is nearly 28,000-30,000 t daily.

Demand for rebar was fell marginally m-o-m especially in Raipur on the basis of limited trading activities amidst the festive holiday of Diwali in the second half of the month, due to which the conversion spread fell slightly. Pre-Diwali trading was concluded at INR 46,500/t (basic) in Raipur, as per sources.

On the contrary, in Durgapur conversion margins improved as mills sought to maintain a standard spread by amidst lower prices. Most of the mills are running at half their production capacity.

Blast furnace-route rebar prices recovered slightly in October on account of some improvement in the September demand and rising coking coal prices, following which the mills raised offers for October deliveries.

Current prices of BF-route rebar are at INR 56,400 (12-32 mm) exy Mumbai.

Trade dynamics

Trades and buying enquiries: In October, enquiries and trade volumes remained moderate in the spot market due to lack of buying enquires and trade activities.

As per SteelMint's assessment, spot trades fell by around 40%, m-o-m, in October on limited demand. Rising inventories at mills created selling pressure and a few hot charging mills were holding their operations at the re-heating mills in Raipur and Durgapur.

Raw material prices: Steel billet and sponge iron prices fell slightly by around 1%, m-o-m in both the markets. Billet prices were under slight pressure due to low movement of finished material during the second half of the month.

Difference between IF and BF rebar prices: Difference between induction furnace and blast furnace rebar prices was around INR 400-500/t in October. Due to active demand and the upsurge in raw material prices, blast furnace rebar prices increased by around 1% and now the current gap is INR 2,000/t. Prices are on ex works basis for Mumbai.

Currency crunch: Due to low trading activity in the market, liquidity issues arose in the spot market, due to which low dispatch was witnessed in the domestic markets.

Price movements
The average trade price of rebar in Raipur and Durgapur for October was down 1% to INR 51,138/t and INR 50,780/t, respectively. The key factor for stability in rebar prices was the slight change in raw material prices (sponge iron and billets).

Outlook: Rebar prices are expected to see slight variations in November. High sales pressure may weigh on prices at the beginning of the month. At the same time, with the improvement in trades, prices may remain supported towards the latter half of the month. Generally, finished steel demand is better during the year end (November-December) on account of the fact that the period is a favourable one for construction activities.