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

The spread between imported scrap and rebar in Mumbai widened to Rs12,700/mt ($173.02/mt) on Sep 30 from Rs11,700/mt ($159.03/mt) in the end of August due to substantial fall in imported and local scrap prices over the past two weeks. However, prices of rebar did not fall much in the same period as demand from some government-led infra projects supported sales of rebar. 


Imported and local scrap prices in September fell by Rs1,000-1,200/mt ($14-16/mt) in Mumbai, while rebar and billet prices fell by Rs200-500/mt ($3-7/mt). But in Raipur, which is sponge-based market, sponge prices fell by Rs1,600/mt ($21.8/mt), rebar and billet prices fell by Rs900-1,000/mt ($12-14/mt). 


Most electric arc furnace (EAF), induction furnace (IF) based steelmaker had better margins in September compared to sponge-based steel producers. Besides, scrap availability across Maharashtra improved in the second half of September as many mills in Nashik and Pune region have completely shut operations due to short supply of oxygen. Those supplying scrap to these mills have diverted their sales to Mumbai or Jalna-based mills learnt Davis Index. This has led to price pressure in the local scrap market.


Meanwhile, sponge-based secondary steelmakers have requested the government to ban the export of iron ore to China to offset the shortage of iron ore in the domestic market. Various association including Indian Chamber of Commerce (ICC) and All India Induction furnaces Association (AIIFA) have written to PK Sinha, principal advisor to PM Narendra Modi on Sep 25 mentioning the surge of export, lower production and short supply of iron ore since April. This has put pressure on sponge iron makers to lower prices from last week, which has impacted scarp prices too.


During April-Sep, Indian iron exports surged by 63pc to 22mn mt from the prior year period, while production dropped by 50pc to 47mn mt during the period as many mining leases expired in March and operations are yet to resume after the allotment of new leases. 


A few private miners in Odisha have resumes mining activities recently after staying closed for a long period. On Sep 15, the Karnataka government cleared the mining lease for NMDC Donimalai iron ore mine in Bellary district. Mining is expected to resume in mid-October which will increase the production of iron ore by 0.5-0.6 mn mt per month and ease supplies in the domestic market in the next few months. 


In September, secondary mills across India ramped-up production and reached 70-80pc capacity utilisation. Market participants had earlier indicated that demand for finished steel would return to normal in September as soon as monsoon subsides and labour strength at construction sites returns to 100pc. However, demand is still lagging.

Billet and rebar spread in India (Rs/mt)
Davis Index prices MumbaiRaipur
 Aug 31Sep 30Aug 31Sep 30
HMS 1 & 2(80:20) *              302               286 
Pellet-Sponge         20,100          18,500 
Billet          30,550          30,150          30,000          29,000 
12mm rebar          33,900          33,700          32,550          31,700 
 * UAE-origin cfr Nhava Sheva

($1 = Rs73.42)

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