Cast Iron Price Trend and Production Costs in 2011 of China

Published: 30th March 2011
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After Chinese New Year (CNY) holiday, the cast iron prices in China have been increased largely, and this change was sudden and serious, so many clients were doubted about what reasons have caused the price increasing, and what price trend will it be in 2011.

The main influence factors to cast iron prices include pig iron price, exchange rate of currency, manpower cost and the prices of other related materials.

1. Pig iron price

The pig iron cost will affect the cast iron prices directly. For example, if pig iron price increased 100 USD/ton, then the prices of iron castings will increase 100 USD/ton.

In August, 2010, the pig iron was about 550 USD/ton, in December, 2010, it was about 620 USD/ton, and in March, 2011, it has increased to 650 USD/ton. You could see the large increasing in the past one year.

Moreover, the pig iron is very unstable near 650 USD/ton, and many sources estimated the price will still keep increasing in 2011.

2. Exchange rate of USD to RMB

As for the buyers from USA or purchasing iron castings by USD currency, the exchange rate of USD to RMB will directly and severely affect the cast iron prices. As for all iron foundries in China, such as Dandong Foundry, we calculated our production costs by RMB, but we quoted to the clients by USD. Therefore, if the exchange rate has large decreasing, then it will directly affect our profit since our production costs do not have any change. So, large decreasing of exchange rate will cause the price adjustment.

From 2008 to today, the exchange rate of USD to RMB has decreased from 7.09 to 6.56. Quick and Severe.

3. Manpower cost

Manpower cost, e.g. workers’ salaries, also affect the cast iron prices. In 2011, the prices of the articles for daily use and houses have increased largely, moreover, many new construction works demand more building workers, so the workers’ salaries increased largely after CNY in China. Most iron foundries in China have increased their salaries about 30% in the early of 2011. Even so, more and more workers quitted for more higher salaries.

Increased salaries have affected not only the cast iron prices, but also machining costs. The machining in China has become more costly than before.

4. Other related materials

The resin cost has increased from 9000 RMB/ton into 19000 RMB/ton because of the shortcoming of raw materials. The resin cost increasing has deeply affected the prices of resin sand castings and shell molding castings.

The painting workers’ salaries and paint costs have increased too, so largely affected the painting and coating costs.

Therefore, the above factors have caused the increasing of cast iron prices in China.

In 2011, the pig iron price is very unstable, we can not predict its trend, but unlikely it could reduce since all articles have become more expensive. The exchange rate should still keep decreasing from news. We just hope it does not reduce too quick. For workers’ salaries, although they have been adjusted after CNY, maybe it need to be adjusted again in May if the prices of all articles still keep increasing.

Of course, Chinese government is trying to control the prices of all articles, so we can not jump to predict the price trend of iron castings, but personally, I do not have the positive attitude.

For the latest prices for grey iron, ductile iron and carbon steel castings, you could visit the homepage of Dandong Foundry, we updated the prices and price trend timely.

This article was from Dandong Foundry. For the whole article, please check Dandong Foundry Blog.


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