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16. March 2014

IN - Nearly 15% SME foundries shut shop due to demand slump

About 80 per cent of India's $12 bn foundry industry comprises SMEs, 15% are medium-sized players and only five per cent are large units

Several small and medium-sized foundries across the country have been forced to stop production, owing to a demand slump. Industry insiders say that most of these units cater to automotive manufacturers and ancillaries, and that 10-15 per cent of them have either closed down or stopped production temporarily.

About 80 per cent of India's $12 billion foundry industry comprises SMEs, 15 per cent are medium-sized players and only five per cent are large units. Reena Bhagwati, joint managing director of Bhagwati Autocast Ltd and president of the Institute of Indian Foundrymen (IIF), said that while average capacity utilisation in the overall foundry industry is around 70 per cent, for those supplying to automotive players, especially manufacturers of heavy commercial vehicles and passenger cars, average utilisation is down to 50-55 per cent.

The automotive segment consumes 32 per cent of the foundry industry's output - much higher than power (five per cent), railways (six per cent), industrial machinery (seven per cent), and sanitary ware (nine per cent).

Pawan K Mishra, owner of Shree Ganpati Castings, a 300 tonne-per-month unit at Jaipur, said, "Our factory is running at less than 50 per cent capacity. We supply to passenger car makers like Tata Motors and Maruti Suzuki, and commercial vehicle players like Eicher." With lower capacity utilisation the overall cost of production increases and profitability shrinks substantially, he said.

"Everyone is in the red," said S K Jain, owner of Vallabh Auto Cast, which has a unit in Agra (one of about 150 in that belt) with a capacity of 150 tonnes per month. His unit, however, is less impacted, as his main clients are tractor makers. "Demand from the tractor segment is down by 10-15 per cent, and hence we are less affected. However, several small units in the area have shut shop, at least temporarily, in the face of sluggish demand from key industries," he explained.

Added to this is the issue of lack of trained manpower. "Finding skilled manpower is an issue, as there is no sustained demand and people tend to drift off," said the owner of a unit in Bhavnagar, Gujarat. Bhagwati feels that the foundry industry needs mechanisation and automation of processes, in order to improve quality standards and reduce human error. However, with inadequate capital inflow, units are not in a position to invest in plant and machinery.

This leads to higher rates of rejection, say industry players. Subodh Panchal, owner of Kastwel Foundries in Gujarat, said, "Earlier, rejection rates were in the range of 8-10 per cent. However, now with several foreign players in the automotive industry, quality standards have gone up several notches. And hence rejection rates are higher than before."


Source: busenisstandard.com

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