With steep hike in raw material costs, foundries which produce metal castings are either forced to curtail or shut production, as they are unable to meet the rising cost pressures. Costlier raw materials and other input materials has pushed up production cost at foundries by at least 25% over the past two months. With fading margins and shrinking working capital, foundries across India are forced to temporarily shut down production for at least a fortnight or more, according to the Institute of Indian Foundrymen (IIF) – a pan India association for the foundry fraternity.
Making matters worse, foundries are unable to cash-in on fresh order volumes due to
supply-side bottlenecks triggered by uncertain supply and rising cost of raw material.
This is making foundry operations unviable and lot of small units are on the verge of
closure, according to IIF.
In the wake of this, IIF has sought that the government revokes the import duty on key raw materials used in casting production. Mr Devendra Jain, President, IIF, said, “Most raw materials are imported and therefore, cutting down the import duty will help bring down cost of production. The government should encourage manufacturing of ferro- alloys and various chemicals used in casting production in India through policy support.”
Concerns over the increase in prices are not limited to India alone but is a global phenomenon. Foundry owners and allied industries from countries like China, Korea,
Japan, Taiwan, Vietnam and Malaysia, among others, too expressed concerns over the
unprecedented price rise during a detailed discourse at the recently concluded Asia Foundry Forum.
“The automobile and agriculture-vehicle manufacturing industry here is supported by
various factors such as availability of skilled labour at low cost, robust R&D centres, and low-cost steel production. However, the surge in price of metal castings will be an
added blow for auto makers at a time when they are already reeling semi-conductor
shortage. In the longer run, this will become a major roadblock in India’s journey of
becoming a world leader in automobile manufacturing,” said Mr Jain.
“Overall cost of iron castings has increased by at least 20-30% over the past three to four months. Most foundries are on periodic contracts with buyers including Original
Equipment Manufacturers (OEMs) who generally do not agree to share the price burden. This erodes profitability of foundries, drying up their revenue streams amid cost pressures and makes doing business unviable in both near-term and long-term outlook. Due to unprecedented rise in the costs of raw materials, power, labour, container crisis and multi fold rise in shipment costs, the foundry units in India are badly affected and hence impacting their competitiveness in domestic and well as in the export market,” he further added.