Pump & Motor Industry Is Heaving A Sigh Of Relief

The pump and motor industry in Coimbatore, which caters to nearly 45% of the country’s requirements, is heaving a sigh of relief as per tonne copper prices have come down drastically. Today, copper costs around $3,550. “The reduction in copper prices would help us mitigate the loss we suffered in the last two years due to escalation in the price of the important metal,” said Aqua Engineering’s GM (materials) R Krishnan. He said that the company stopped entering futures contract once the price fell to $7,500 from $8,300 per tonne.

Though used to forward contracts, the leading pump and motors companies had resorted to buying on spot because of the prevailing downslide in copper prices for the last oneand-half months. Moreover, the city’s small and medium enterprises mostly buy their requirements from local market. “Already, the industry is facing lot of problems like slackening demand for pump sets, 40% less power available from the grid and expectations of people to reduce the prices because of drop in raw material prices. In this situation, the crash in copper prices and fall in other raw material prices is the only positive development,” said CRI pumps MD G Rajendran. However Mr Jayakumar Ramadass, President of Southern India Engineering Manufacturers Association (SIEMA) and MD, Mahindra Pumps, told ET that it is very difficult to pass on the benefit to customers.

“Most companies have stocks for another 3-4 months, which were purchased at higher costs and clubbed with power crisis, the cost of production has gone up by 40%.” Mr Rajendran said the industry could look at reducing prices only after January 2009. The organised pump industry in Coimbatore is worth around Rs 1,600 crore, of which CRI pumps’ market share is around 20%. The industry consumes 400-500 tonne of copper every month.

According to Mr Ramadass, copper constitutes nearly 10-15% of raw material requirements of the industry. “Copper price has been gradually increasing in the last two years and this August it shot up drastically and we were forced to increase the cost of our products by 8-10% to offset the raw material price rise. The price further increased in October but we couldn’t increase the product cost because of lower orders,” he added. However in the last one-and-half months, the copper prices are on a downslide because international demand has come down and copper wire suppliers believe prices would hover in this region ($3,500-4,000 per tonne) for another two years.

“Since China is a major consumer of copper and with the Olympic games in Beijing, the copper prices escalated in the last two years,” said Ram Ratna Group representative Mani Parakka. Mimani Wires Coimbatore representative R S Nair added the main losers are local suppliers like him, who had to source copper from their head office. “Last week I took orders for copper rods when the price of a rod was at Rs 240 and today it has come down to Rs 220. So we have to take the brunt and supply to our customers at market rate of Rs 220,” he said.

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