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PrintFoundries across the country are forced to run at half their capacities after clients in the automobile, textile and heavy engineering sectors cut supply contracts because of demand slowdown.
The industry compares the scenario with the one in 2008 and do not expect any let-up for another six months. "Input costs have gone up, but we are unable to pass on the rise to clients. If we insist, the order goes to another unit. Clients know many players have spare capacities," says Ronak Shah, director of Ahmedabad-based Mahavir Castings.
Price of steel scrap rose 20 per cent to Rs 32.50 per kg in May. Similarly, pig iron is costlier by 10 per cent at Rs 35.50 per kg and ferro silicon prices rose by 6 per cent to Rs 81 per kg, according to a data by Indian Institute of Foundrymen, an apex body for the foundry industry.
Rise in fuel prices, electricity costs and wages has further hit input costs, say industry players who have been impacted by rupee devaluation while importing inputs.
Chennai-based Nelcast says, its production has come down to 7,000 tonnes from 10,000 tonnes per month a few months ago.
"Auto players have already cut their schedules by 30-50 per cent as sales are declining. Heavy vehicle and Multi Utility Vehicles (MUVs) are the worst hit. The next 3-4 months will be tough," says B Ramachandran, general manager (purchase) Nelcast Limited. The company supplies products to Tata Motors, Ashok Leyland, Eicher Motors and Tafe.
Amish Panchal, chairman of western region of IIF says textile and heavy engineering too are in a bad shape since four months. "Pumps and wind mills companies too are working at 50 per cent of capacity," he says.
A weak rupee is not helping exports because units in Europe are in a bad shape following the financial troubles there. Mushrooming of foundry units has also worsened the situation, feel the players. Clients freely bargain as many units are awaiting contracts.
"Competition is intense. Desperate players offer low rates to bag a contract," says Mayank Kejriwal, director of Kolkata-based Kiswock Limited. The company saw a contract from a car maker fall by 35 per cent in May. In June, it was further down to 55 per cent.
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