With spike in billet prices the conversion spread remain low from P-DRI to Billet in Raipur, Durgapur & Hyderabad where the manufacturers melts 80-85% sponge to produce billet.
Currently, the conversion spread (margin) are evaluating from P-DRI to billet in Raipur at INR 9,200-9,600/MT, Durgapur at INR 9,000-9,400/MT & in Hyderabad at INR 9,600-9,700/MT. According to the manufacturers, the conversion spread remained limited despite sharp hike in billet prices.
According to the manufacturers on an average they required conversion spread approximately at INR 10,000/MT which is prevailing in an around INR 9,500/MT. They further added, increasing prices of other key melt products like pig iron, scrap & Silicon Manganese are other major burdens for them as the prices of the respected products are also on increasing mode.
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 lower than industry average then the products are priced at less than the input cost and are not profitable.
Source: SteelMint Research
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