Scrap, pig iron and alloys are among the biggest costs in a casting, so when their prices move, casting prices follow. Most foundries either requote for each order or use a price variation clause linked to a published raw material index.
You cannot control metal markets, but you can control how changes reach your price. A clear clause protects both you and the foundry.
What goes into the melt
A foundry's charge mix depends on the metal it is making:
- Grey iron is usually made from steel scrap, cast iron returns and pig iron, with silicon and carbon additions.
- SG iron needs low levels of certain trace elements, so foundries use cleaner steel scrap and a high-purity pig iron, plus magnesium treatment alloy and inoculant.
- Steel castings use steel scrap and ferroalloys such as ferromanganese, ferrosilicon and ferrochrome.
- Alloyed grades add nickel, molybdenum, copper or chromium, which can move sharply in price.
Other costs that move with metal
Melting energy is the next large cost. Many Indian foundries now use electric induction furnaces, so electricity tariffs matter. Coke-fired cupolas depend on coke prices. Moulding sand, resins and refractories are smaller items but also move.
Not all of a casting's cost moves with metal. Pattern cost, labour, machining and overheads are more stable. That is why a fair variation clause applies only to the material share of the price.
Exchange rates add another layer for you as an importer. If you buy in your own currency, movements in the rupee change your landed cost even when the foundry's price is unchanged. Decide which currency the order is priced in and who carries that risk.
How price variation clauses work
A typical clause sets a base price and a base index value on the date of the quote. At agreed intervals, the price is adjusted by the change in the index multiplied by the casting's weight, or by a fixed material share of the price. Changes within a small band may be ignored to avoid constant revisions.
Agree these points in writing:
- Which published index is used, and where both sides can see it.
- The base date and base value.
- How often prices are reviewed, such as monthly or quarterly.
- Whether the clause works both ways, so you gain when metal prices fall.
- Which orders it applies to, especially orders already confirmed.
What you can do
Place larger orders in periods of stable prices if your cash flow and storage allow. Ask for quote validity in writing. Check that a price rise matches the index move, rather than accepting a round figure. The broader effect of metal prices on machinery is covered in how steel and copper prices affect machinery costs, and quote structure in how castings are priced.
Next step
We review price variation terms before you sign and check revisions against the agreed index. A real price for your part comes from a quote. To start, book a free sourcing review.