← Business Metric: Industry Specific (Industrials & Materials) (all topics)
Spread - metal conversion charge (tolling)
What it is
Copper and aluminium extruders earn a fabrication margin per tonne for turning cathode or rod into extrusions, strips, tubes and wire. Metal is passed through at LME-linked prices on both sides, so this conversion charge is the entire economic return
It makes revenue a poor indicator of performance - a converter's turnover moves with the copper price while its actual earnings depend only on tonnage and charge per tonne
Impact on industries
- Insulates earnings from commodity direction, since the business is a toll on volume rather than a bet on price - stability commodity producers do not enjoy
- Higher-specification products earn a materially better charge, so mix, approvals and tolerance capability are the levers rather than metal price
- The charge is set competitively and compresses when capacity is added, so overcapacity translates directly into margin loss with no commodity upside to offset it
- Fixed conversion charges against rising power, labour and consumable costs squeeze the spread, and a converter has no pricing lever on the metal component to compensate