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Metal Casting Technologies : September 2006
www.metals.rala.com.au 32 Trends and Problems, and Hopes Information gathered from the industry indicates that the present year is slightly worse than 2005, and 2005 was slightly worse than 2004. The trend is thus downward in production. In 2006, the average plant utilization for cast iron foundries producing both gray iron and ductile iron is determined at about 72.1%; for cast steel foundries it is about 40.6%; and for non-ferrous foundries, 87.5%, especially for aluminum. The domestic consumption for all metals produced is about 92.6% of the total; while the exports absorbed about 7.4% at about an overall average of 65% plant utilization. There is apprehension in the industry that the downward trend would continue as market conditions do not seem to improve. Here are some of the culprits, there are others too delicate to mention: The cost of scrap metals is still very high, varying only slightly from last year. This is because there is an existing export market for scrap metals, so scrap metals are being exported. The industry has to contend with meeting export prices in order to get any raw materials for itself, whenever scrap is available. There is a continually increasing cost of electric power. The charges of electric utility companies for energy (KWH) and demand (KW) are tabulated below showing the historical increases as gathered from the Manila Electric Company (MERALCO) Billing Department. While energy charge increased by 385% only from 1985 to 2005; demand charge increased by 3,032% during the same period. Since plant utilization is low, the demand charge plays havoc to electric power costs. To cite an example, most foundries use electric induction furnaces rated at about 1,000 KW, on the average, that chalks up 1,000 KW maximum demand when operated, or P429,390.00 per month at 2006 rates. This means that, if one foundry operates its furnace only two days a week, its power demand costs would be equal to another foundry operating a similar furnace five days a week. The cost of power demand alone per tonne melted in the first foundry would be 2½ times that in the second foundry. The lower tonnage produced per month further increases the cost per tonne produced due to the lower productivity. This is the great disadvantage of operating at low plant utilization, but what could be done if the market demand is low? The alternative being considered by the Cast Iron Foundries is to revert to the cupola that requires only a fraction of the electric power needed by induction furnaces. But then, the emission and pollution problem comes into the picture --- a cupola is a worse pollutant than an induction furnace. This may be the proverbial "jumping from the frying pan into the fire!" The ever rising cost of living in the Philippines is caused by rising oil prices in the world. The militant labor sector thus demands an increase in the legislated minimum wage in order to cope. Increasing labor cost further increases production costs with the same labor productivity, and the ultimate resulting higher prices would make the products that much less competitive. About half-a-century ago, the Metals and Engineering Industry, through the Iron and Steel Industry, was listed as one of the top seven priority projects of the Philippines. Today, it has lost its place in the priority list, being supplanted by other less basic service industries. Its multiplier effect as a basic manufacturing industry has thus been lost. This delisting is perceived as one of the reasons why scrap metals, that are the raw materials of the industry, have been allowed to be exported; similar to the plight of the leather shoe industry whose leather raw materials were allowed to be exported thus producing problems to the once lucrative and widely acclaimed industry. The Metalcasting Association has called government attention to this and hopes that government realizes this on time --- before the industry is completely extirpated. The present situation is not conducive to new investments and the cost of money is high, there is thus a lack of capital for modernization. Modernization is crucial to producing better quality castings at lower costs, and it is a "must" for survival. Furthermore, it is hoped that foundries would overcome their attitude that the foundries next door are their competitors, and that the domestic market alone is their market. No! The foundries next door are their allies, and the foundries in other countries are their competitors, and the world is their market. The industry has to learn to compete with the world and in the world. Unless it does this, the future does not seem too bright for the industry. Note: 1. By April 1997, this was increased to P220.00 per KW maximum demand (Rates are in Philippine pesos). 2. This is an average figure (P366.32 to P406.12) as the demand charge was now based on the input voltage. The average demand charge as of June 2006 is P429.39 per KW maximum demand. Item 1955 1965 1975 1985 1995 2005 Energy Charge P0.0639 P0.0598 P0.2796 P1.7915 P2.9370 P6.8941 per KWH used Demand Charge P12.60 P12.60 P12.60 P12.60 P25.00 P382.00 per max. demand 1 2 AsianFoundryOverview