They have appealed that the Foundry Industry will need wholehearted support from all stakeholders until prices normalise.
Coimbatore: In a press statement released by the Coimbatore Chapter of the Indian Institute of Foundrymen (IIF), they said the Foundry Industry is going through very rough times. They have highlighted issues like the migrant workforce, investment, need for price stabilisation and have requested support from fellow stakeholders.
The statement said, "In the emerging scenario unless supported by suppliers and customers, Government interventions apart, many Foundries, especially the ones in the MSME sector will find it extremely difficult to tide over the situation. Since the Covid-19 recovery phase, thanks to the various initiatives of the Government, an uptick in demand has been good. The majority of the Industry is dependent on the Migrant Workforce. Post pandemic, efforts are on to reduce reliance on human interventions and hence the industry is witnessing investment cycles for both upgrades and modernization."
The press release also said, "Unfortunately, the Foundry Industry which is sandwiched between the suppliers and customers is caught in the vicious cycle of cost-push inflation, with inadequate support from either side of the value chain. Over the past few years, keeping in line with the inflation, prices of inputs have gradually increased. Though there has not been adequate compensation by the customers, the Industry was able to absorb certain portions of these increases through various measures, mostly through modernization and balancing out of the workforce."
Adding, "However, the last few months, from Nov 2020 onwards, there have been steep increases in input prices and manpower costs all across, due to the C19 recovery phase. While reasons are either mundane or unknown, input prices have almost doubled from 2019-20 levels."
The statement declared that the majority of the OEMs have revised upwards the prices of the end products. "As mentioned earlier 70% of foundries cater to OEMs. OEM Customers do not compensate Foundries for the price increases and also delay any price compensation by at least a quarter. The foundry industry is unable to withstand the free run of input costs and the pace with which surges happen. If the Foundry Industry is to tide over the supply chain induced crisis and survive, it will call for extreme measures from all stakeholders, especially suppliers and customers," it was mentioned.
The release added that the commoditized nature of Industry has made it a Margin sensitive industry. "Any small changes in cost structure and capacity utilization will result in negative margins. This is precisely the present scenario. The delay in compensating for the surges have had severe financial implications on many Foundries especially SMEs and have put their feasibility to continue business under question," it said.
Indian Institute of Foundrymen Coimbatore Chapter Balraj in the release has also added that the Foundry Industry will need wholehearted support from all stakeholders and one possible solution is for the OEMs to correct prices once a month till the raw material price situation normalizes.
The statement said, "In the emerging scenario unless supported by suppliers and customers, Government interventions apart, many Foundries, especially the ones in the MSME sector will find it extremely difficult to tide over the situation. Since the Covid-19 recovery phase, thanks to the various initiatives of the Government, an uptick in demand has been good. The majority of the Industry is dependent on the Migrant Workforce. Post pandemic, efforts are on to reduce reliance on human interventions and hence the industry is witnessing investment cycles for both upgrades and modernization."
The press release also said, "Unfortunately, the Foundry Industry which is sandwiched between the suppliers and customers is caught in the vicious cycle of cost-push inflation, with inadequate support from either side of the value chain. Over the past few years, keeping in line with the inflation, prices of inputs have gradually increased. Though there has not been adequate compensation by the customers, the Industry was able to absorb certain portions of these increases through various measures, mostly through modernization and balancing out of the workforce."
Adding, "However, the last few months, from Nov 2020 onwards, there have been steep increases in input prices and manpower costs all across, due to the C19 recovery phase. While reasons are either mundane or unknown, input prices have almost doubled from 2019-20 levels."
The statement declared that the majority of the OEMs have revised upwards the prices of the end products. "As mentioned earlier 70% of foundries cater to OEMs. OEM Customers do not compensate Foundries for the price increases and also delay any price compensation by at least a quarter. The foundry industry is unable to withstand the free run of input costs and the pace with which surges happen. If the Foundry Industry is to tide over the supply chain induced crisis and survive, it will call for extreme measures from all stakeholders, especially suppliers and customers," it was mentioned.
The release added that the commoditized nature of Industry has made it a Margin sensitive industry. "Any small changes in cost structure and capacity utilization will result in negative margins. This is precisely the present scenario. The delay in compensating for the surges have had severe financial implications on many Foundries especially SMEs and have put their feasibility to continue business under question," it said.
Indian Institute of Foundrymen Coimbatore Chapter Balraj in the release has also added that the Foundry Industry will need wholehearted support from all stakeholders and one possible solution is for the OEMs to correct prices once a month till the raw material price situation normalizes.