Indian EAF or Induction Furnaces Margins Remain Supportive

The conversion spread (margins) from Sponge iron or Scrap to MS Billet remained good despite volatility in prices, as per SteelMint's analysis.

As per producers, on an average the required conversion is about INR 12,000-12,500/MT from Pellet sponge to Billet which is currently hovering at INR 13,000-13,500/MT in Raipur & Durgapur. This is quite good as per experts.

-- The current price of Sponge P-DRI is hovering at INR 19,000-19,200/MT (FeM 78) in Durgapur & INR 20,400-20,600/MT (FeM 80) ex-Raipur. Meanwhile Billet trades reported at INR 32,300-32,500/MT in Durgapur & INR 33,400-33,600/MT ex-Raipur for 100*100 mm & commercial grade.

Similarly the producers who are making Billet through the large proportion of scrap need conversion close to INR 8,000/MT, which is presently not less than of INR 9,000-10,000/MT in Western & Southern India - Gujarat, Maharashtra & Chennai, where producers melt more than 70-80% melting scrap(either domestic or imported).

The furnaces in Northern India - Mandi Gobindgarh are being fetching good conversions of INR 10,000-10,500/MT from HMS (80:20) Scrap to Billet, as per participants.

-- As per assessment, the melting scrap (80:20) prices in major markets hovering at INR 25,100-25,300/MT ex-Mandi Gobindgarh, INR 26,200-26,400/MT ex-Ahmedabad, INR 25,400-25,600/MT ex-Mumbai & INR 25,000-25,300/MT ex-Chennai. Meanwhile Billet prices stood at INR 35,900-36,100/MT ex-Mandi Gobindgarh, INR 35,400-35,600/MT ex-Ahmedabad, INR 36,100-36,300/MT ex-Mumbai & INR 34,400-34,600/MT ex-Chennai.

It seems there is scope for price corrections in Billet if demand remains dull in future. However on the other hand the steel prices strengthening globally, so there are less expectations among participants to pull down Indian steel prices.