Chinese battery plant shutdowns affect Indian SMF battery market

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By Srabani Sen

The shutting down of 583 lead acid battery manufacturing plants in China over the recent months has not only affected the booming Chinese market but also many other countries that depended on Chinese batteries. The slowdown in the Chinese battery manufacturing scenario has affected end users across the globe, as China accounted for a quarter of global lead acid battery production.

Battery factories in China were forced to close down for a variety of reasons like improper disposal of hazardous wastes, poor technical standards, ignoring environmental rules, and polluting or contaminating natural resources. Heavy metal pollution is a serious concern in China. This year, high lead levels were detected in the blood of more than 200 children in a city in central China, and 300 children in two other cities suffered from lead poisoning.

Impact on India’s battery market

According to Samrath S Kochar, COO, Trontek, the Indian battery market has been severely affected as India imports 80 per cent of its small size SMF batteries from China. With supplies having dried up in China, there is a severe shortage of small sized batteries of up to 12 V 18 AH. “The impact on the Indian battery market has been similar to what has happened in the Chinese market. There is a huge gap between demand and supply in India too. There are now only a few battery manufacturers in China from whom we can import,” informs Aditya Arora, COO, Base Corporation. Adds Vikas Aggarwal, CEO, Computech Systems, “There is an acute shortage because no other country can manage the shortfall in the supply caused by widespread plant closures in China.”

In the current situation, in which only a handful of lead acid battery manufacturers are still in operation in China catering to both their domestic as well as global demand, imported Chinese SMF batteries are much costlier than India-made batteries. “Since the prices of batteries have gone up in China, battery prices in India too have shot up. This has been coupled with the steep devaluation of the Indian rupee, which has further made battery imports from China non-viable. The supply to the Indian market has been most severely affected with regard to smaller capacity batteries like 6 V 4 Ah and 12 V 7 Ah, that mostly come from China. The mid-sized and large VRLA battery segment has not been affected much since the existing manufacturers have stepped in to plug the gap. But importers in India, whose business model relied solely on imports from China have been severely affected,” adds Biju Bruno, managing director, Greenvision Technologies Pvt Ltd.

According to Biju Bruno, there has been a price increase of 20-25 per cent in smaller batteries and about 10-15 per cent in mid-sized VRLA batteries.

Adds Samrath Kochar, “The battery factories that survived the Chinese crackdown have increased their prices by more that 35 per cent. Moreover, the delivery lead time has increased to four to five months. And due to the virtual absence of SMF technology in India, local companies are forced to accept the longer lead times and higher prices. Business cannot stop since India has a huge demand for SMF batteries, which cannot be met only by local production.”

Another reason for the battery price hike in India is because the lead market got affected by the Chinese shutdowns. The price of lead took a hit due to the Chinese shutdowns, and currently, on the London Metal Exchange, the price for lead is US$ 2550 per tonne.

Impact on Indian battery players

Although the impact of the Chinese factory closures has not come as a surprise to the Indian players, they have nevertheless been hit severely. While most of the smaller units are struggling and will probably shut shop, the larger players are trying to get sub-contract manufacturing done from local Indian factories. “This is not a sustainable strategy since there are very few Indian firms with the capability to manufacture all types of batteries. It is also questionable whether they would want to support the erstwhile importers, as they would rather sell more under their own brand names and consolidate their positions,” explains Biju Bruno. Greenvision will start its own production line soon and will be fully online with large scale production of all battery capacities by the second quarter of 2012.

According to Aditya Arora, Indian players are now exploring the possibilities of setting up their own manufacturing units to continue supplies so as to retain their customers. They are also looking to different Asian countries like Taiwan, Philippines, Malaysia and Bangladesh among others, which might prove to be cheaper options.

However, some Indian players like Artheon Group have benefited from the Chinese battery crises. Artheon Group, which has a state of the art battery manufacturing plant in Nasik, is fully booked due to this sudden glut in Chinese imports. A major player in small battery segment in India, Artheon Group manufacturers batteries ranging from 6 V 4.5 AH, 12 V 7.2 AH, etc. in joint venture with North Star of USA. “Players who were importing batteries from China feel the quality difference in India made batteries as they are far superior than most of the Chinese batteries. Artheon has come up as a major relief to large OEs who were dependent on imports from China,” states Sunil Bhatnagar, director, sales and marketing, Artheon Electronics Ltd.

Flooded batteries not affected

Fortunately, supplies of flooded batteries have not been affected, as these are manufactured in India. Says Vikas Aggarwal, “Since SMF batteries take up the maximum share in our imports, the market for these batteries has been affected. There are no imports of flooded batteries from China.” Adds Aditya Arora, “Even vented lead acid batteries are indigenously designed and manufactured by Indian companies for inverters and UPS applications. However, some imports have been affected in the automotive market also.”

Adds Biju Bruno, “The manufacturing setup and technological expertise required for flooded batteries is very rudimentary and there are hundreds of small manufacturers in India. In fact, in this segment, there’s a glut in production and a slump in demand, leading to depressed pricing conditions over the last six to eight months.”

What lies ahead

In India, according to a recent report by Angel Broking Ltd, the lead acid battery market is a Rs 100 billion industry. However, according to some industry estimates, with local battery brands flourishing across the country, the figure can even be as high as Rs 170-180 billion. Now, it remains to be seen how this huge industry faces the current crisis. Will it take up the challenge and begin indigenous SMF battery manufacturing or will it collapse under the adverse conditions?

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