China sourcing loses charm for Indian cos

Discussion in 'Economy & Infrastructure' started by Yusuf, Dec 8, 2010.

  1. Yusuf

    Yusuf GUARDIAN Administrator

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    BANGALORE: China's manufacturing costs are reaching levels that are now forcing some companies that source products from the land of the dragon to reduce such sourcing and manufacture these in India more economically.

    Watch and jewellery major Titan Industries, which sources watch components from China, said it plans to restrict such sourcing and instead make additional investments in its manufacturing facility in Tamil Nadu. Similarly, it is now cheaper for Dell to supply PCs from India than from China, especially to countries in the Middle East, Africa and the CIS countries. Dell, which started exports of PCs from its Sriperumbudur plant near Chennai earlier this year, has become the first major PC brand to export out of India and is now exporting several thousand units every month to West Asia.

    That's not all. Indian auto component major Sona Group also has considered sourcing parts from China in the past but sees no significant cost advantage in doing so. The tide therefore clearly appears to be changing.

    Bhaskar Bhat, MD of Titan Industries, puts it in perspective. According to him, the firm has been outsourcing a lot to Chinese manufacturers, but "that's becoming a challenge as costs are going up". "We want to derisk," he adds.

    Chinese costs have risen significantly, and more so in recent months as the country has eased its monetary and currency policies. China's central bank raised benchmark borrowing and deposit rates in October for the first time since 2007 and increased the reserve requirement for banks twice in November. Since June 19, when it introduced a more flexible exchange rate policy, China's currency renminbi has appreciated by 2.6% against the dollar, making Chinese exports more expensive.

    The expectation is that the currency will rise further in the coming months. Labour has become expensive, especially along the coastal belt, which has been the focus of China's developmental efforts in the past decades. In the past one year alone, labour cost is said to have gone up by 21%. China has also imposed stricter pollution control norms on its industries, compelling them to make relevant investments.

    It's perhaps for these reasons that the Sona Group, does not sees any significant cost advantage in sourcing from China. "We do import a small portion of our forgings supplies from China for one of our group companies. However, because the prices of parts in India and China are similar and owing to the distance and lack of clarity about China's currency situation, most of our sourcing is done within India," said Surinder Kapur, chairman of Sona Koyo Steering Systems.

    India has been second to China in Deloitte's country ranking of manufacturing competitiveness in recent years, and from most accounts, the difference is narrowing. The rising costs, combined with India's growing manufacturing prowess, partly explain why, as TOI reported recently, India exported more automobiles than China did between January and July this year. While India exported 2.3 lakh cars, vans, SUVs and trucks during this period, a growth of 18%, China's exports tumbled 60% to 1.65 lakh units. The same reasons explain why Nokia today exports mobile handsets to some 70 countries, including North America and Europe, from its Sriperumbudur facility.

    Aravind Melligeri, chairman of QuEST Global, which makes aircraft components in its SEZ in Belgaum, Karnataka, in joint ventures with foreign firms, said US and European firms are worried about labour unrests in China affecting delivery cycles and escalating costs.

    "China's currency appreciation is also hurting costs," he said.

    Bhat estimates that the overall cost base (labour and fixed costs) of his Chinese vendors has gone up by 50%. "They have not passed all of that on to us. But sooner or later they will have to ask for a further price increase. And that's when we will find it really difficult," he said.

    However, not everybody is rethinking China. Arvind Walia, MD of Gabriel India, which makes auto parts like shock absorbers and struts front forks, said China would remain a major sourcing destination for the company.


    Read more: China sourcing loses charm for Indian cos - The Times of India http://timesofindia.indiatimes.com/...ian-cos/articleshow/7062462.cms#ixzz17VxQU5aE


    Pretty interesting this. I wish I could get more figures on who is stopping sourcing from china and which sectors. I just came back from a tour of SL where all those who i visited were sourcing from China.
    I would say good news this for India.
     
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  3. RPK

    RPK Indyakudimahan Senior Member

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    http://www.istockanalyst.com/article/viewiStockNews/articleid/4727490

    Toyota Tsusho to build rare earth plant in India

    TOKYO, Dec. 8, 2010 (Kyodo News International) -- Japanese trading house Toyota Tsusho (OOTC:TYHOY) Corp. said Wednesday it will construct a rare earth processing plant in India to produce and export to Japan about 3,000 to 4,000 tons annually from 2012 in an effort to secure suppliers other than China.

    The Nagoya-based group company of Toyota Motor Corp. (NYSE:TM) said it will start building the plant in the Indian state of Orissa in the beginning of 2011 and plans to launch production by the end of that year, in collaboration with Indian Rare Earths Ltd., an affiliate of the state-controlled Nuclear Power Corp. of India and Japan's Shin-Etsu Chemical Co. (OOTC:SHECY)

    Toyota Tsusho is developing rare earths also in Vietnam, and with the planned Indian plant, will come in 2013 to supply around 10,000 tons of rare earths a year, or roughly one-third of Japan's total demand, according to a company official.

    The Orissa plant will use rare earth chloride mixtures as raw materials in processing oxides of three types of rare earths, including neodymium used in motors for hybrid cars.

    The mixtures are by-products of fuel extracting process by the Indian nuclear power firm.

    Shin-Etsu Chemical is expected to provide technical support and to engage in product trading with the rare earths plant.
     
  4. badguy2000

    badguy2000 Respected Member Senior Member

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    it is a interesting move.
    let's wait and see .
     
  5. Yusuf

    Yusuf GUARDIAN Administrator

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    Thats it from you BG? Come on mate, we need more from you on this.
     
  6. amoy

    amoy Senior Member Senior Member

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  7. badguy2000

    badguy2000 Respected Member Senior Member

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    well, usually, Southern Jiangxi means Ganzhou prefecture,where I live .

    Mining of rare earth&Tungsten and its processing is the pillar of local economy!

    many of my relatives live on rare earth business and the earned quite a lot of quick buck because the price of rare earth rises much.
     
    Last edited: Dec 8, 2010
  8. Ray

    Ray The Chairman Defence Professionals Moderator

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    Rare earth elements or rare earth metals are a collection of seventeen chemical elements in the periodic table, namely scandium, yttrium, and the fifteen lanthanides.

    Despite their name, rare earth elements (with the exception of the highly unstable promethium) are relatively plentiful in the Earth's crust, with cerium being the 25th most abundant element at 68 parts per million (similar to copper).

    The rare earth elements are often found together. However the longest lived isotope of promethium has a very short half life of less than 20 years and so the element only exists in nature in negligible amounts

    he use of rare earth elements in modern technology has increased dramatically over the past years. Rare earth elements are now incorporated into many technological devices, including superconductors, samarium-cobalt and neodymium-iron-boron high-flux rare-earth magnets, magnesium alloys, electronic polishers, refining catalysts and hybrid car components (primarily batteries and magnets).Rare earth ions are used as the active ions in luminescent materials used in optoelectronics applications, most notably the Nd:YAG laser. Erbium-doped fiber amplifiers are significant devices in optical-fiber communication systems. Phosphors with rare earth dopants are also widely used in cathode ray tube technology such as television sets. The earliest color television CRTs had a poor-quality red; europium as a phosphor dopant made good red phosphors possible. Yttrium iron garnet (YIG) spheres have been useful as tunable microwave resonators. Rare earth oxides are mixed with tungsten to improve their high temperature properties for welding, replacing thorium, which was mildly hazardous to work with. Many defense-related products also use rare earth elements as enhancers. For instance, night vision goggles, rangefinders, the SPY-1 radar used in some Aegis equipped warships, and the propulsion system of Arleigh Burke class destroyers all use rare earth elements in critical capacities.

    Until 1948, most of the world's rare earths were sourced from placer sand deposits in India and Brazil.
     
  9. Ray

    Ray The Chairman Defence Professionals Moderator

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    Any mining activity is an ecological disaster and yet mining has to be done if the present civilisation has to progress.

    Rare Earth is an important input in a variety of industries including defence and has great potential.
     
  10. badguy2000

    badguy2000 Respected Member Senior Member

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    the industry Zone of Ganzhou city, where is full of rare-earth processing enterprises.
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  11. amoy

    amoy Senior Member Senior Member

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    a big eye opener for me since I wasn't aware Jiangxi was rich in rare earth too until reading those reports.

    rare earth exp from China was so cheap that countries like the US and Australia even closed down their mines and imported from China. Japan imported in large quantity and built up huge reserves .

    I think Ganzhou shall do more value added processing rather than exporting as raw materials at dirt cheap prices.
     

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