Market and price slump worry ferro-silicon industries in Pasakha

Since the beginning of the year, Bhutanese ferro-silicon industries have been left worried with the slump in prices and market for ferro-silicon produced at their plants.

Demand for ferro-silicon and the raw material to manufacture steel has dropped, affecting the industries in Pasakha, industrialists claim. The price for the product has subsequently decreased since January and is still on the decline. Also, the market has equally shrunk along with the price. Last year, the market and the prices were good.

Most ferro-silicon from Bhutan is exported to Indian markets and some to European countries. The price at the beginning of the year remained at Nu 90,000 per Metric Ton (MT). It has decreased to Nu 69,000 per MT today.

Decrease in the demand in the Indian market due to enough supply of ferro-silicon from India itself is seen as one reason. India steel plants require around 12,000 MT of ferro-silicon per month. For them, around 10,700 MT is produced in Indian plants. Bhutanese industries currently produce around 13,000 MT per month. New ferro-silicon plants have been set up in India in recent years therefore the demand is met from within the country. Also, due to import hassles, these steel plants prefer to procure the raw materials from India.

Also, the Indian industries have resorted to use cheaper steels from China and Korea which has ready-made raw materials at the plants. Therefore the requirement of ferro-silicon from Bhutan has subsequently decreased. Industries in Malaysia also have lesser trade barriers compared to Bhutanese industries, according to industrialists. Bhutanese industries are losing competitive edge over Indian industries.

Almost all the industries in Pasakha have their ferrosilicon stocks at the plants yet to be dispatched. The import volume has decreased unlike in the past year. “The repercussions are huge,” one of industrialists in Pasakha said. Some companies are exporting to clear the dues with the companies and are worried about the market, once they are cleared.

Also, the increasing production from Bhutan has also led to excess supply in the market which has caused prices to drop, according to some industrialists in Pasakha. Few more ferro alloys and metal manufacturing companies in Pasakha have also ventured into ferro-silicon manufacturing companies, which is yet another reason for excess supply in the market. “The supply is more and the Indian companies have the choice of products,” another industrialist said. 

Competition among regional ferro-silicon manufacturing industries is also another challenge for the market. Within North India, there are eight industries which manufacture the product and sell.  

Ferro-silicon is the only single largest traded commodity in the world where the market price is uniform across the world.

The only ways forward for the industries are to hope for the government to exempt tax for the industries earning convertible currencies. They are also hoping that the government will reduce Corporate Income Tax (CIT) to 25% to promote level playing field with the Indian companies. Currently, industries pay 30% annually as CIT to the government.

Also, power tariff is another area the industries are hoping that the government will look into.

Industries have been contributing to the government through employment, earning foreign currency and taxes.  

Meanwhile, the Association of Bhutanese Industries (ABI) is still working with the government to make the situation favorable for the industries. ABI President Pema Tenzin said that the government is keen to help the industries.“The power tariff is the only mechanism by which the manufacturing industries can sustain,” he said. The president has also talked with relevant agencies on power tariff and hopes that the decision would help the industries.

pic courtesy: facebook

Krishna Ghalley from Pasakha, P/ling