India: Wire Rod manufacturers margins plunge by 30% m-o-m
Low demand along with sharp fall in prices during the first half of Feb, has led to fall in conversion spread (margins) of Indian mid-scale wire rod mills by 20-30%, m-o-m, in Feb'21.
Raipur & Durgapur are the major wire rod producing markets considering secondary mills, where conversion spread fell by INR 970/t (20%) & by INR 1,675/MT (30%), respectively, m-o-m, in Feb'21.
As per SteelMint's assessment, monthly average conversion spread from billet to wire rod stood at INR 3,890/t in Raipur & INR 3,805/t in Durgapur during Feb'21.
Trade sources have reported that demand remains subdued in the domestic market, citing sufficient stock among end users' industries and average demand of remaining materials produced through the Wire rod & HB wire.
In the current trade reference, wire rod prices are hovering at INR 42,000/t exw Raipur & INR 42,000-42,300/MT ex-Durgapur, size 5.5 mm & excluding 18% GST.
Out of total wire rod production in India, secondary (mid-scale) mills contribute about 55-60%, while the rest is produced by large scale mills through blast furnace billet.
Market sources are expecting wire rod prices to remain volatile and less likely to drop further as there is no major scope of fall in billet prices due to poor margins along with tight supply of sponge iron due to healthy raw material export orders among major producers.