Local Indian pig iron prices have come under renewed pressure during the past week, weakening by INR 100-200/mt ($1.6-2.6/mt) ex-works, as demand for foundry grade pig iron has slumped and also due to overstocking, traders said on Wednesday, July 9.
"The foundry sector is facing a crisis. Most small and medium-sized foundries have been unable to pass on cost increases to their buyers in the automobile and engineering sectors," an official at an eastern India-based pig iron manufacturer said.
"Moreover, a large number of traders in the eastern and northern Indian markets have overstocked pig iron riding on bullish sentiments in flat steel product prices, but these sentiments have proved to be short-lived. Flat product prices are now indicating a correction and producers have reduced transaction volumes for steel grade pig iron too," he said.
According to a spokesperson for the Institute of Indian Foundrymen, about 4,000 small and medium-sized foundries across the country are in dire straits and are facing imminent closure as they have been unable to hike prices of casting products for the automobile and engineering sectors.
He said that, while the automobile industry had been granted a concessional rate of excise duties on passenger cars by the government, there were no such concessions for foundries to absorb higher inputs costs of pig iron and electricity.
Overall sales of casting products to the automobile and engineering sectors have fallen by around 30 percent over the past one year, he added.
Market sources said that signs of a revival in pig iron prices last month were also not sustained on account of oversupply, since no large export tenders from large pig iron producers have been reported in the market since early June.