The local Indian rebar market has remained firm a amid positive outlook regarding the revival in construction activities, but the lack of strong upward momentum in prices has put pressure on secondary producers, who are seeing conversion margins being narrowed in the wake of rising billet prices, SteelOrbis learned from trade and industry circles on Tuesday, August 10.
Rebar prices of integrated steel mills have been maintained in the range of INR 54,500-55,000/mt ($734-740/mt) ex-works with the traded price around INR 56,000/mt ($754/mt) ex-Mumbai. Prices of secondary mills have also remained unchanged, at around INR 53,000/mt ($713/mt) ex-works, with the traded price around INR 54,000/mt ($727/mt) ex-Kolkata.
However, several market participants and industry officials pointed out that, while “the price of rebar of secondary mills was barely inching up, the price of billets was galloping up sharply, reducing conversion margins of mills, and increasing operational stress.”
It was pointed out that over the past two weeks billet prices have increased by INR 1,800/mt ($24/mt), while secondary mills were able to increase rebar prices last week by only INR 500/mt ($7/mt), narrowing conversion margins and forcing mills to keep plant utilization levels at 50-60 percent to keep variable costs in check amid falling margin realizations.
“Secondary mills are in a difficult situation. Input costs of raw material or semis are rising much faster than finished long products. The commodity super cycle is benefitting mills with a diverse product portfolio and/or with captive raw material sources,” an official at a Kolkata-based long product mill operator said.
“Steel demand is seen to be rising at aggregate levels, not at the granular level. Mills producing only long products will remain under stress from falling conversion margins unless the construction sector, and real estate in particular, sees a quantum revival,” he added.
$1 = INR 74.26
