Jamnagar brass units cut production by 65%

Faced with a big decline in demand for their products, brass parts manufacturing units in Jamnagar, Gujarat, have been forced to cut production. The decline in demand, coupled with volatility in international brass prices and fluctuations in the value of the rupee against the US dollar, has resulted in hard times for the Jamnagar units.

Manufacturers in Jamnagar have cut production by over 65 per cent in the past three months. The cutbacks have been attributed by the brass units to volatile international prices, while fluctuations in the value of the rupee have adversely affected imports of brass scrap.

"We have not got new orders for the last two months. In view of this, most of the brass manufacturers have cut production by about 65 per cent," said Ramji Patel, president of the Jamnagar Factory Owners' Association (JFOA).

According to Patel, barely 100-125 tonnes of brass scrap is being consumed per day currently, compared to 250 tonnes per day during October-November last year. A year ago, brass scrap consumption was almost 300 tonnes per day, he claimed.

"Brass scrap prices are based on copper prices on the London Metals Exchange (LME), so we cannot do anything to control it. The international market is also volatile, so maintaining steady production cost in the present scenario is difficult for small players. As a result, brass scrap imports have also declined," said Jinesh Shah, managing director, Rajhans Impex Pvt Limited.

The fluctuating value of the rupee against the US dollar is also one reason for the industry's reduced consumption of brass scrap. Shah said that currency fluctuations have a direct impact on profit margins. The rupee has been trading at Rs 54-55 against the US dollar for the last couple of months.

The Jamnagar brass parts industry is mostly dependent on demand from the real estate sector, the auto sector and electronics manufacturers. "Since all these sectors are reeling under a slowdown, the demand for brass parts has decreased," Patel said. According to JFOA, most units are working only four or five hours a day.

There are 5,000 brass-making units in Jamnagar, of which over 80 per cent are in the small-scale category. The annual turnover of the Jamnagar brass parts industry is estimated at about Rs 2,500 crore. For the past three years, the industry has sustained a turnover at this level, but due to slowdown in other industries, the average turnover is likely to drop to about Rs 1,800-1,900 crore for the financial year 2012-13, JFOA members said.

The Jamnagar-based industry exports brass parts worth about Rs 300-400 crore to Europe, the US and the Gulf countries every year. But due to the global economic crisis, the industry expects it to be 40-50 per cent lower this year.