Prices of raw materials like phenol, rare earth have risen up to 300% since Sept 1.
A sharp rise in prices of ferro alloys has hit hard the foundry industry, which casts components for the entire engineering sector, including automobiles.
Prices of ferro alloys, phenol and rare earths — all directly used as raw materials or as ingredients in input materials for foundries — have risen up to 300 per cent since September 1.
Ferro silicon, a key input for foundry units, is at 85 a kg as against 62 a kg in the beginning of the month, a rise of 37 per cent. Similarly, mischmetal prices quadrupled in the first three weeks of the month to $40 per kg from $10 per kg. Prices of phenol, used as a binder, were 129 a kg on September 21 from 103 a kg on September 1.
“This calls for an immediate ban on export of ferro alloys till the situation normalises,” said A K Anand, director of the Delhi-based Institute of Indian Foundrymen (IIF). If the trend continued, the foundries would have to reduce the scale of operations, he said.
Prices of magnesium, used in ductile iron castings, have also risen 20 per cent in just one month from $2,600 a tonne in August to $3,100 a tonne now. China, the only producer of rare earth, has restricted its export, pushing the price from $1,200 a tonne in August to $3,100 in September.
According to IIF sources, a draft report by China’s ministry of industry and information technology has called for a ban on foreign shipments of terbium, dysprosium, yttrium, thulium and lutetium. Other metals such as neodymium, europium, cerium, and lanthanum will be restricted to a combined export quota of 35,000 tonnes a year, far below the global needs.
New technologies have since increased the value and strategic importance of these metals, but it will take years for fresh supply to come onstream from deposits in Australia, North America and South Africa. The rare earth family are hard to find and harder to extract.
“We in India are eager to export our valuable natural resources like iron ore. Why can’t the government formulate a policy to restrict export of natural resources by imposing prohibitive export duties or intervene and have a strategy to barter materials such as iron ore, of which China is the single-largest importer from India?” asked Anand.
However, T S Sundaresan, secretary general of the Indian Ferro Alloy Producers Association, defended exports, especially of ferro silicon. More than half of ferro silicon’s total requirement is being imported. India’s import rose sharply during 2009-10 to 125,138 tonnes as compared to 82,751 tonnes in the previous year. Since supply from China has been restricted due to local governments’ decision to ban smaller units owing to environmental pollution problems, the global market is in a deficit. As a result, prices were moving up and the situation could not be addressed by an export ban, Sundaresan said.
Since ferro silicon producers in India are getting a remunerative price now after long years of selling at a loss in comparison to international prices, they will be looking to increase domestic production to meet the local demand. India’s ferro silicon output rose three per cent last year to 102,000 tonnes. This year, the output may rise further, says Sundaresan.
