Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Sponge iron prices in India shot up in August due to sharp increase in iron ore and iron pellet prices in domestic and international market. However, finished steel prices including rebar did not increase at the same rate as demand from construction activities is still lagging. With spreads narrowing, most electric arc furnaces (EAF), induction furnaces (IF) and re-rolling mills are struggling. 


A few integrated steelmakers in Central India were quite active in selling iron pellet in the export market to offset domestic demand. China was one of the major buyers during the last few months. 


In H1 2020, India’s iron ore export touched an 8-year high at 20mn mt iron ore. This caused a drop in iron ore and pellet’s availability in domestic market, driving prices of semi-finished products like sponge , ingot and billet.


Sponge prices in India in the period rose by Rs3,000/mt ($41.04/mt) while imported scrap prices increased by Rs1,500/mt ($20.52/mt), billet prices by Rs1,500-1,800/mt ($20-24/mt) and rebar prices by Rs1,000-1,500/mt ($14-20/mt) ex-works depending on the region. 


In August, secondary mills across India ramp-up production and reached 70pc capacity utilisation from 50pc in June. The supply of finished steel increased but there was subdued demand from end-users of steel which disturbed the demand-supply equilibrium. 

At present, ongoing government projects are the only source of demand while that from the construction sector is yet to pick-up pace, according to sources in Raipur’s steel mills. Heavy rainfall, especially in Madhya Pradesh and Chhattisgarh, also dampened trading activities in August.


Market participants strongly believe that as soon as monsoon subsides in September and labour strength at construction sites returns to 100pc, demand for finished steel products will increase to cover the H1’s shortfalls to a large extent.


Raipur spread 

The spread between sponge and rebar in Raipur decreased to around Rs12,700/mt ($173.75/mt) on August 31 from Rs14,500/mt ($198.38/mt) in early August. Sponge prices increased by Rs2,800/mt ($38.3/mt) in the period while rebar was up by just Rs1,000/mt ($13.68/mt).


Mumbai spread 

Secondary mills in Mumbai were able to maintain margin in August as rebar prices increased in line with imported scrap prices. Rupee strengthening against the US dollar also helped. The spread between imported scrap and rebar in Mumbai widened marginally to around Rs12,000/mt ($164.18/mt) on August 31 from Rs11,700/mt (160.07/mt) in early August. 


Rupee strong against US dollar, relief to the mills:

EAF and IF makers in Western India that rely on imported scrap benefitted as Rupee rallied against the US dollar and provided relief to the steelmakers as profit margin increased. Indian Rupee was at Rs73.09 against US dollar on September 2, from Rs74.9 in August 1. 


($1 = Rs73.09)


India’s semis and finished steel prices:

Davis Index Prices (in Rs/mt)MumbaiRaipur
July 31, 2020Aug 31, 2020July 31, 2020Aug 31, 2020
HMS US Origin CFR India ($/mt)                 281                    301 
Pellet-Sponge         17,300             20,100 
Billet             29,050                30,900          28,500             30,000 
12mm rebar             32,200                33,800          31,800             32,800 

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