India: Rebar producers in Raipur record surge in conversion spreads in September

The conversion spread from induction furnace-origin steel billet to rebar increased sharply by 35% in Raipur, central India, while margins decreased slightly in Durgapur, eastern India, by around 6%, m-o-m, in September, as per SteelMint data.

On a monthly average basis, the conversion spread was recorded at around INR 3,800/t in Raipur and INR 3,100/t in Durgapur in September for material size of 10-25mm and for grade 500 Fe for rebar.

Rebar demand saw a marginal improvement m-o-m, especially in Raipur, with the rise in conversion spread of mills that had halted production in August but resumed operations later due to better margins. Trader sources informed that capacity utilisation by mills increased due to the hike in demand.

Another major factor behind the surge in margins of the Raipur mills was the revised gauge parity for 8-32mm material, which rose by INR 500/t to 6,000/t, while the parity remained constant for 10-25mm material at INR 4,500/t in September.

Durgapur suppliers witnessed limited demand in the neighbouring regions of north-east India due to heavy rains, leading to poor offtake of finished steel products.

BF rebar demand inches up

With the narrowing down of the price difference between BF and IF rebar, demand picked up with major mills, especially from the project segment. The price gap between the two dropped to around INR 500/t in September as against INR 1,000/t in August, especially in western India.

Buyers were shifting their interest towards BF-route rebar due to cost and grade concerns. Following this, later in the month, BF-route prices improved on demand recovery. Mills raised offers during the last week of September.

SteelMint's price assessment rose by INR 600/t to around INR 55,900/t exy Mumbai for 10-32 mm material.

Trade dynamics

Buying enquiries and trade volumes in September remained positive in the spot market. SteelMint recorded about 18% m-o-m rise in Raipur rebar spot trades with 56,000 t in September.

In addition, inventories also declined with prompt dispatches of material. However, the trends were opposite in Durgapur as inventories remained high with miils due to lower trade volumes.

Raw material prices: Billet prices (monthly average) dipped by around 2% and 3% m-o-m in Raipur and Durgapur, respectively. The key reason was the decline in sponge iron prices.

Improved supply of sponge iron from the neighbouring markets (Odisha), especially for Raipur, put pressure on the sponge market. Sponge prices declined by around 7% and 5% in Raipur and Durgapur, respectively, in September.

Outlook

Market participants are of the view that finished steel prices are unlikely to surge during the festive season. However, India has entered the peak season for construction and infra projects and it seems that finished steel demand will remain active, which may result in price volatility in October.

However, raw material price movements are expected to play a major role in determining the prices of finished steel products, sources said.