About 50 small and medium-sized foundry units have shut down across the country in the last 15 days and another 100 units are on the verge of closure following sky-rocketing input costs and the inability of customers, primarily auto component makers, to hike prices of their products.
Pune, one of the major foundry hubs, alone has witnessed the closure of 25 units, according to industry sources. The prices of key raw materials have risen by as much as 30-83 per cent within a short span of time.
Period between August 2007 and March 2008
Raw materials - Price rise (%)
Mild steel scrap - 47 %
Pig iron - 46 %
Cast iron scrap - 47 %
Coke - 42 %
Ferro manganese - 83 %
Other ferro alloys - 30 %
V Mahadevan, president, Indian Institute of Foundry Men (IIF) and managing director of Hinduja Foundries has confirmed the reduction in capacity and shipment. At present, foundries are operating at only 40 per cent of their capacity.
“Foundry units are under severe threat as the auto component manufacturers (ACM) have refused to raise prices. As these units sign long-term contracts (5-6 years), any rise in prices on the contracted value is rejected by ACMs,” Mahadevan said.
ACMs consume almost 75-80 per cent of castings and, therefore, any decision taken by them affects foundry units directly.
“There are six large and 80 tiny and medium size castings units in Pune,” an industry source said.
A K Anand, director, IIF, said: “The industry has been forced to severely curtail output and even shut operations.”
User industries, such as automobile, auto-component, tractor, engineering, machine tools, textiles and agriculture, will be hit hard by this crisis. Exports, which account for revenues of Rs 4,000 crore annually, are also facing the music.
Increasing inputs cost have compelled exporting units to absorb heavy losses since prices are contracted for long periods. “The appreciating rupee has further dented the profitability of these units,” he added.