Strong demand from both Indian domestic & global markets amid positive sentiments have increased the manufacturers conversion spread to 5 month high which was last reported in Jul’16.
Currently, the conversion spread (margins) from P-DRI to billet reported at INR 9,800/MT in both Raipur & in Durgapur, which was last seen in the starting of Jul’16, almost six month back.
A reliable source in Raipur (Central India) who has hot rolling mill and also sell billets in open market quoted, “presently conversion spread is around INR 10,000/MT, is preferable below as it is tough to survive for long terms”.
Analyzing the lowest range in the year of 2016, it was around INR 7,700/MT in Raipur during October & in Durgapur in September.
It seems that if demand of billets remain supported the manufacturers margin may further strengthen in near future.
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.
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