Despite hike in billet & sponge prices, the conversion spread (margin) remained low from P-DRI to Billet in Central India – Raipur & in East India – Durgapur where the Inductions largely melts sponge iron near to 80-85% to produce Ingot/billet.
Currently, the conversion spread (margins) in Raipur & Durgapur are hovering at INR 10,000-10,500/MT from P-DRI to billet which is not healthy according to the manufacturers.
The conversion spread is firm in line with supported demand and coupled with short supply of sponge iron and power cut issue in few of the major markets. However, amid low margins (conversion spread) the producers are operating furnaces in full utilisation as demand is supported presently.
According to the manufacturers on an average for the good margins the conversion spread should be near above INR 11,000/MT which is not happened for sometime.
Today, P-DRI prices are assessed at INR 17,000-17,200/MT ex-Raipur & INR 17,100-17,200/MT in Durgapur and Billet are evaluated at INR 27,100-27,300/MT ex-Raipur & INR 27,600-27,700/MT in Durgapur; basic & excluding of GST.
Note: The conversion spread represents the speculative cost of production and margins. If the conversion spread is above industry average then the price of the products is higher than the input cost (including miscellaneous, raw material cost and power cost) and the spread is profitable. If the spread is downtrend than the products priced are less than the input cost and are not profitable.
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