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Imagine a world without raw materials. No cars, no computers, no homes, no food. It’s a pretty bleak picture, right? Raw materials are essential to produce all the products we are using in our daily lives. In India, some of the most common raw material examples in business used for manufacturing, energy, and other industries include steel, aluminium, copper, iron, gold, cement, glass, cotton, coal, oil, sand, wood, etc. Also, the demand for these types of raw materials is high at all times and so is the cost of raw materials.
Here, in this article, we will have a look at the importance of raw materials and some of the raw material examples in businesses that are commonly used by industries in India. Further, we will discuss some recent trends in the raw materials costs.
A closer look at the type of raw materials in India
In India, raw materials can be classified as either direct or indirect.
- Direct raw materials are materials that are used directly in the production of a product.
- Indirect raw materials are used in the production process but are not a significant part of the final product. Usually, they are smaller in quantity and value compared to direct raw materials.
Here are some examples of direct and indirect raw materials in India:
Direct raw material examples:
- Steel used in the construction, automotive and other products
- Iron ore used to produce steel
- Cotton used in the textiles industry
- Coal for power generation
Indirect raw material examples:
- Packaging materials for shipping and storing products
- Fuel for transportation
- Tools/ equipment used in the manufacturing industry
- Chemicals used in the chemical industry
Examples of raw materials in India
Here are the top 10 latest raw material examples in India:
- Coal- It is a fossil fuel, used in thermal power plants to generate electricity, produce steel, power industrial processes, etc. India is the third-largest producer of coal in the world and, is also home to the fifth-largest proven reserves of coal.
- Iron ore- Another raw material example that is mined in many countries worldwide, including India. Typically, a rock or mineral contains iron. And is the most important source of iron for the steel industry. It is a raw material that is processed and then used to make steel. India is the world’s second-largest producer of iron ore.
- Steel- India is the world’s third-largest producer of steel. Steel is an alloy of iron and carbon. It is a strong and versatile material that is used in a wide variety of applications, including construction, machinery, transportation, etc.
- Copper- It is a soft, malleable, and ductile metal with very high electrical conductivity. Generally, used in a wide variety of applications, including electrical wiring, plumbing, and construction.
- Bauxite- It is an ore that contains aluminium. Aluminium is a lightweight metal that is used in a wide variety of applications, including construction, transportation, and packaging.
- Limestone- It is a sedimentary rock that is composed of calcium carbonate. And is used in a wide variety of applications, including cement production, steelmaking, and agriculture.
- Sand- It is a loose, granular material that is made up of finely divided rock and mineral particles. Typically, used in a wide variety of applications, including construction, glassmaking, and water filtration.
- Cement- It is a binding agent that is used to hold together aggregates, such as sand and gravel. The most common applications of this raw material, include construction, infrastructure, and manufacturing.
- Petroleum- It is a fossil fuel and is found in underground reservoirs. Typically, a versatile raw material is used in multiple products such as cars, trucks, airplanes, etc. Further, it is also used to make petrochemicals, which are, then used to make plastics, fertilisers, and other products. India is the world’s fifth-largest consumer of petroleum.
- Natural gas- It is a clean-burning fossil fuel. And is a good alternative to petroleum and coal. As it can be used to generate electricity, produce fertilisers, and power other industrial processes.
Importance of raw materials in businesses
Raw materials are the basic inputs (processed/ unprocessed) required to create finished goods. They are essential for businesses of all sizes, from small and emerging businesses to large corportations. However, there are many different types of raw materials; the specific types of raw materials that a business uses will depend on the products that it produces. For example, an automobile manufacturer uses steel to manufacture cars, a furniture manufacturer will need to use wood, etc.
In addition, businesses should carefully manage their raw material costs to remain profitable. As the cost of raw materials prices are highly volatile and can fluctuate significantly over time. Thus, significantly impacting the business’ bottom line. As a result, it is crucial for businesses to consider several factors before procuring raw materials and be prepared for the uncertain possibilities that may occur in future raw material prices.
Current raw material costs in India
In India, the current prices for raw materials in India have decreased in recent months. This is due to multiple factors. It includes:
- Ease of global supply chain disruptions
- Decline in commodity prices
- Strengthening of the Indian rupee (₹)
As a result of these factors, the prices of various raw materials have fallen in India. For example, since January 2023 the price of steel has fallen by 20%, copper by 15%, aluminium by 10%, etc.
This decline in raw material prices, however, is a positive development for Indian businesses. It helps them to reduce their costs and improve their profitability. Thereby, making Indian products more competitive in the global market. But it isn’t a permanent trend, and businesses must be ready for the possibility of an increase in future raw material prices.
However, it is important to note that the decline in raw material prices is not a permanent trend. Commodity prices are volatile and can fluctuate significantly over time. As a result, it is important for Indian businesses to be prepared for the possibility of future price increases.