October 16, 2012
Reposted from Kuensel
Ferro silicon exports slowed down in the first six months of this year half-yearly unaudited accounts indicate, and industrialists say this is because of lower demand in India, the primary export destination, and rising prices of raw materials.
This comes two years after the industry bounced back from the 2008-09 global recession that threatened to sink the six new startups at the Pasakha industrial estate.
Druk Wang Alloys’s unaudited balance sheet, published recently, shows only Nu 12M as corporate tax, down from Nu 44M last year. Its profit before taxation was Nu 48M as of June, down from Nu 160M for the same period this year.
Similarly, Bhutan Ferro Alloys ltd. recorded Nu 48M profit before tax up to June this year, compared to Nu 138M for the same period last year. Its corporate tax was Nu 14M this year. Last year, it was Nu 86.5M for the same period.
Ferro-silicon industrialists said the economic slowdown in India has translated into less demand, and consequently prices have also gone down by almost 25 percent; while, at the same time, prices of raw materials had drastically increased.
While electricity is the main raw material, the industry also uses coal, coke, charcoal, quartz and electrode paste as raw materials to manufacture ferro silicon, which look like grey lumps, that steel industries used to purify and improve quality of steel.
While electricity prices did not change much, prices of all other raw materials saw significant increase, according to industrialists.
Price of coal, for example, almost doubled from Nu 7,000 a metric tonne (MT) to Nu 13,000/MT this year, coke prices increased from Nu 13,000/MT to Nu 19,000/MT.
Charcoal increased from Nu 13,000/MT last year to Nu 16,000/MT this year, and electrode paste increased from Nu 24,000/MT to Nu 37,000/MT.
The increase in prices of other raw materials has brought down, in terms of cost, the contribution of electricity in the manufacturing process from 60 percent to around 25 percent this year, a Pasakha industrialist said.
While 2011 was overall a good year for the industry, some industrialists had an inkling that 2012 may not be as good, going by what was happening in the last quarter of 2011, because of a slowdown in the Euro zone by the Greece debt crisis.
Bhutan’s main market for ferrosilicon is India and Europe, and both these regions suffered serious economic slowdown this year.
But, with India still being the main market, industrialists are optimistic that things might improve, with the Indian government recently formulating major economic reforms, and drawing back FDI inflows.
Sonam Dukpa of SD Eastern Bhutan Ferro Alloys said the biggest fear for the industry was that, if China started to export ferrosilicon to India on a larger scale than is being done today.
“China dominates around 80 percent of the world’s ferrosilicon production, they could easily afford to make it cheaper, and it might affect Bhutanese industries selling in India,” he said.
A drop in ferrosilicon exports will affect the country’s balance of trade. In 2011, it was, after electricity, the economy’s top export commodity, at around Nu 6B, to India.
Export of copper and its sister concern, software, were next after ferrosilicon, according to statistics available with the revenue and customs department. Both these exports should disappear from the charts, with the government notifying earlier this year it will no longer issue certificates of origin for the software exports.
If ferro silicon exports also continue to drop, the balance of trade in 2012 could widen significantly.
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