Local Indian rebar prices have largely remained unchanged during the past week, but industry reports indicate a further deepening of distress among secondary producers, with more mills slashing plant utilizations or shutting down, with conversion margins hitting a new low, SteelOrbis learned from trade and industry circles on Tuesday, August 17.
Rebar prices of integrated mills have been maintained at INR 54,500-55,000/mt ($734-740/mt) ex-works and those of induction furnace-based producers are still at around INR 53,000/mt ($713/mt) ex-works.
Traded prices of material from integrated mills have also remained stagnant at around INR 56,000/mt ($754/mt) ex-Mumbai. Traded prices of secondary mills have been heard at INR 54,000/mt ($727) ex-Kolkata, but are lower at INR 53,000/mt ($713/mt) ex-Raipur in central India.
However, several trade and industry sources have observed that margins from the conversion of billets to rebar through the induction arc furnace route are now at a one-year low from high prices of billets and energy costs and the sluggish movement in rebar prices.
The sources said that conversion margins even for more efficient furnaces are averaging not above INR 2,000-3,000/mt ($27-40/mt) which do not cover operating losses, leading to operational losses at the continually operating furnaces of mills. Over the past one year, conversion margins have fallen by 20-35 percent depending on the location of mills.
Industry sources estimate that capacity utilizations by secondary mills have fallen to an average not exceeding 50 percent in view of negative conversion margins and several furnaces, particularly in central India, announcing closures, although the mills claimed these to be “maintenance shutdowns”.
Furthermore, the outlook for the post-monsoon seasonal recovery is also bearish as retail bookings from major markets like real estate are not showing signs of a pick-up and producers are mostly resorting to cutting down on raw material inventories and trade rebates on the sale of finished products to keep afloat, sources said.
$1 = INR 74.34