Steelmakers in Durgapur, a region that houses a majority of electric arc furnace (EAFs) and blast furnaces, have noted that revival of demand during India’s festive season in October and November looks bleak. Domestic demand is showing no signs of recovery, stated manufacturers in the region.

 

They said it has been infeasible to buy ferrous scrap as finished steel prices remain under pressure. A few steelmakers took to exporting billets and pig iron to Nepal and Bangladesh to offset low demand domestically in the wake of the COVID-19 pandemic. 

 

A steelmaker told Davis Index that due to the continuous rise in ferrous scrap, they had to substitute 70-80pc of it with sponge iron for making billet. This process needs the use of silicon manganese, an expensive alloy, to get the desired composition of billet.

 

The spread between imported scrap and rebar in Durgapur has tightened to Rs6,951/mt ($95.01/mt) on October 8 from Rs9,200/mt ($125.76/mt) on September 8 due to a significant drop in finished steel prices by 28pc or Rs2,049/mt. Raw material prices, on the other hand, rose by 1pc or Rs200/mt.

 

The spread between sponge iron and rebar in Durgapur has tightened to Rs11,751/mt ($160.63/mt) on Oct 8 from Rs12,600/mt ($172.2/mt) on Sept 8. Considering all input costs like electricity at a tariff of Rs3.5/unit and cheaper labour compared to other regions, the manufacturers preferred sponge-based steelmaking for better margins.

 

 

Scrap to Rebar Spread (Rs/mt)

Dates

Scrap

HMS1&2 (80:20)

RebarSpread
Sep 824,30033,5009,200
Oct 824,50031,4516,951

 

Sponge iron to Rebar Spread (Rs/mt)

DatesSponge-ironRebarSpread
Sep 820,90033,50012,600
Oct 819,70031,45111,751

 

Meanwhile, steelmakers are awaiting a response to their request to the government to ban the export of iron ore to offset the scarcity in the domestic market. Many are also shying away from purchasing ferrous scrap due to volatility in the finished steel market. They feel the government should boost real estate and infrastructure sectors or book certain monthly quantities of finished steel from the steel mills to instill confidence and certainty among manufacturers.

 

 

Leave a Reply

Your email address will not be published.