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

Steelmakers using electric arc and induction furnaces for steelmaking are dealing with narrowed spreads from early June levels amid elevated scrap prices. In Mumbai, rebar prices dropped by Rs3,000/mt ($40/mt) while local scrap prices fell only by around Rs1,500/mt ($20/mt) in a month.


Firm sponge iron prices and weak finished steel demand in the domestic market have also added to the pressure, especially for small and medium-scale steelmakers.


The spread between scrap and rebar in Mumbai decreased to around Rs12,500/mt ($169/mt) on June 21 from around Rs14,500/mt ($195/mt) a month ago. In general, a minimum price gap required to cover the costs from scrap to rebar is Rs13,000-14,000/mt ($175-189/mt), depending on the process – hot charging or re-heating, state steelmakers. They also informed that producing steel through hot charging can save Rs1,000/mt ($13/mt) at the minimum, compared to reheating process.


But rebar prices have dropped by almost double the amount of domestic scrap prices in Mumbai, which has led to a margin squeeze for producers.


In Q1 FY 2022 (April- June), India dealt with the second wave of COVID-19 pandemic, which impacted economic activities. Amid an exodus of laborers, construction sites grappled to keep up the pace of activities.


Labour availability which was around 60-70pc in the month of April and May at various sites has started to improve from early June. Construction activities, however, are unlikely to gather momentum amid monsoon season and a lack of funds with the state government. The situation is expected to normalize only after September, believe market participants.


Some large-scale secondary mills in West India, especially Gujarat, opted to sell billets in the overseas markets to stay afloat amid weak domestic fundamentals. Billet deals were heard at around $610/mt FoB West Coast India in the last few days.


Most of the secondary mills in Mumbai and Jalna are operating capacity utilization to 80-90pc. But increased inventories with mills and low demand failed to support rebar prices. The easing of lockdown restrictions has also failed to bolster demand, defying mills’ expectations. Some mills in Mumbai and Jalna thus believe rebar prices could remain under pressure in the rest of June.


(Prices in Rs/mt, 

excluding GST)

June 21, 2021May 21, 2021
HMS 1&2 (80:20) del                                 34,000                       35,200 
Billet (ex-works)                                 43,000                      44,000 
12mm Rebar (ex-works)                                 46,500                      49,500 

($1= Rs74.10)

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