Metal Casting Cost Savings to Be Had Despite Scrap Import Duties

MetalMiner welcomes guest contributor Suriya Anjumohan, a Senior Research Analyst with Beroe Inc., specializing in metal castings, forgings & stampings. Suriya has worked has worked with many automotive, steel and medical devices clients at Beroe in forming sourcing strategies and providing recommendations. More on the company below.

This post is continued from Part One here.

In India, the unorganized sector, with more small and medium-scale foundries, dominates the metal casting industry.

Since 2012, there has been a severe demand slowdown with the end use market due to economic downtrend, which has caused downstream sectors to be more rigid with regards to quality requirements. Issues with the domestic metal scrap market include:

• Less transparency in the local scrap market, since it is dominated by the unorganized sector
• Reduced quality level, multiple recycling of scrap resulting in excess oxide formation

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In India, before 2013, the import duty for metal scrap was zero. Speculation has been going around that the levied import duty on metal scrap is to be removed by India’s government, or it will rise to further facilitate the domestic sponge iron manufacturers.

Our Takeaway

It is advantageous to Indian metal casters to procure imported metal scrap for a short-term duration for the required quantity against rupee depreciation and levied import duty.

With the imported metal scrap, the yield and quality level are increased, and there is an opportunity for metal casters to save 8% and 15% to the ferrous and non-ferrous cost of casting, respectively.

In order to be competitive and to have consistency with industry-specific standards for a longer term, the foundry players must concentrate heavily on their internal factors over which they have complete control, such as operational excellence. The foundry industry, being the most energy-intensive, must focus on cost optimization through process innovation and energy conservation.

Small and medium-sized foundry players could make use of the government of India’s credit-linked capital subsidy scheme, which provides a 12% capital subsidy on institutional finance availed by them. This is done with the major focus of inducing a well established and technology upgraded foundry base and to other selected sub-sectors in India.

FREE Download: The Monthly MMI® Report – covering the Steel/Iron Ore markets.

A note about the contributor: Beroe is the premier global provider of customized procurement services specializing in sourcing, supply chain visibility, financial risk analysis and environmental impact to Fortune 500 organizations. With nearly 400 dedicated procurement specialists in 38 domains, across 9 industries, Beroe proactively invests in knowledge assets to build valuable, real-time procurement insight.