The upswing in the local Indian billet market has fizzled out during the past week with prices slumping by INR 1,800/mt ($25/mt) to INR 28,000/mt ($391/mt) ex-works, with almost the entire gains of the previous week wiped off in response to the oversupply by producers and the sharp fall in off-take by stand-alone non-integrated steel mills producing construction grade products, traders said on Wednesday, August 21.
“The billet market is caught in a twin-track depression. With pig iron prices down by two percent during the past week and on a four week-long losing streak, the expected fall in supplies in the billet market have not materialized. Large pig iron producers are increasing captive volume conversion to billets to get downstream value addition. But this is only leading to oversupply of billets available for commercial sale,” an intermediate steel product dealer said.
“In addition, stand-alone non-integrated steel mills are lowering capacity utilizations of plants producing construction grade steel in view of the sharp fall in construction activity and hence are lowering off-take of billet as their primary raw material,” the dealer said.
According to an official at a large eastern Indian steel mill with integrated production of pig iron, billets and rebars, the conversion margins of billets to rebar has fallen by close to 21 percent in the May-August period this year, and the fall in profitability of steel melting has resulted in a lower off-take of billets by construction grade steel product manufacturing mills.
$1 = INR 71.49