Metals industry is the backbone of any economy and their Mco-relation is quite direct and linear. This means that the fortune of metals sector depends on the general condition of the economy and is also a measure of health of any
When we say that western world economy has slowed down,
naturally its metals appetite has reduced resulting in lower metals
consumption as well as production. In Asian region, the
infrastructure building is the main agenda which requires huge
quantities of metals. This serves as a very big trigger for the regional
If we look at the famous economic curve, India is at the starting
point of the steep section of the curve whereas China is towards the
end of this section. This means that countries like China have
surpassed their best growth period and very soon their growth will be
plataued. On the other hand countries like India are about to enter
or just entered the fast growth period of the economy. The next one
or two decades are expected to witness a fast economic growth in
India and as mentioned earlier, it has a direct co-relation with the
iron & steel sector.
We all know that last 2/3 years were quite challenging for Indian
mills. Rise in input costs, stagnated demand, shrinking exports and
cheap imports had really destroyed the bottomline of many metal
companies. Now the raw material situation has gradually improved,
mega infra projects have started moving ahead and the metals
demand seems to have started increasing. All this has helped the
industry to stabilize and expect an upward transition in next few
Of course, this does not mean that the Indian industry is free from
problems. Domestic demand stagnation, reducing export
opportunities and cheap imports are still shadowing the industry. A
lot of technological upgradation is required in many small and
medium scale units. If Indian products have to stand in the global
marketplace, they have to be of excellent quality. The concept of
quality also has to be upgraded. I know many metallurgical units
operating without a qualified metallurgist!
Posted in D.A.Chandekar’s Views |
A lot of time has passed since 2008 financial meltdown but the developed world financial markets and even the industry is far from normal. Infact, now instead of calling today’s industry situation as ‘depressed’, a new term ‘new normal’ has emerged.
Of course industry fortunes differ from region to region and MENA (Middle East & North Africa) is one of the most prospective regions as far as the industrial growth is concerned. The oil price crash did affect this region for the last one or two years but nobody can deny the fact that the region offers tremendous potential on a long-term basis. Today, it is considered as one of the few growing economies in otherwise financially stressed world.
The industrial growth of MENA region is lead by the mega infrastructure and construction projects spread all over. Yes, the projects did get a jolt when oil price crashed and liquidity shrinked but now with somewhat better oil prices, these projects are expected to move forward.
Along with the huge quantity of steel required for such infrastructure projects, a good amount of non-ferrous metals too are consumed. Especially, the metal of 21st century, aluminium is used in many forms. Extrusions are used for panels, intricate shapes, wires are used as conductors, castings are used as auto and machinery parts, foils are extensively used in food and insulation industry etc. The technology and the processing of aluminium products have undergone a sea change in last decade or so. A lot of new trends in production and applications are emerging. The customer industries include power, aerospace etc. The use of technologies like simulation, 3D printing is expected to completely change the face of aluminium industry in coming years..The GCC region offers the best environment for the growth of aluminium industry. A huge primary metal producing capacity, numerous downstream industries and a promising marketplace.
India has vast reserves of bauxite. If the economic activity increases and infra projects & construction activity take a leap in coming years, the demand for steel and metals will increase manifold. This will surely give a big boost to non-ferrous metal production. Aluminium, the metal of 21st century, has tremendous growth potential and will certainly shine!
Indian economy is seen as one of the few growing economies in the world. In spite of the general slowdown in the world, depressed oil prices, demand stagnation, India managed to put up a decent growth rate of around 7 % in the fiscal 2016-17.
The main drivers of the economy were steady performance by manufacturing as well as service sector, infrastructure development projects and a good performance on agriculture front. Of course, good monsoon in 2016 has been a boon and helped to strengthen the financials of the people associated with this sector. This has further helped to keep the demand curve climbing up.
As far as the metals industry is concerned, the major customer industries are automobile, construction, engineering and the metals requirement in mega infra projects. I do agree that all these sectors did not show a sparkling growth but have certainly given some push to the metals demand. Primary metals producers are planning and even implementing capacity expansion plans. The component and engineering industry was earlier looking aggressively for the export markets. Today, conventional export markets are either stagnated or dried up. Thus the component industry needs to look at the emerging markets and at the same time, consolidate their presence in domestic markets.
As I see the things, gradually positive sentiment is growing, the industry is regaining the confidence and have started planning for the future. A lot of infrastructure projects had been announced earlier. Now is the time to execute them. Industry too is banking on these government funded infra projects as these are the major triggers for metals demand to rise.
The downstream industries like casting, rolling, extrusion too depend heavily on auto, transport, construction, power and if Indian economy can achieve higher growth rate than the previous fiscal, everything will start falling in line.
After many years of fight, debate, deliberations, finally the present government has managed to pass the long awaited GST bill which is expected to be implemented by July 2017. This is surely going to start a new era in the India economy and is expected to simplify the tax structure. Further, the manufacturing sector (which includes our metals sector) is expected to gain from this change and to certain extent, will help to reduce the stress within the industry.
This seems to be the right time to do a bit of futuristic planning and to take a little bit more risk!
Last few years have been really testing ones for the entire minerals & metals vertical. In most parts of the world, the metals demand seemed to be growing slowly or stagnated, especially in the western world.
This millennium saw the emergence of Asia as the growth engine of the world for manufacturing and infrastructure industry. It consists of the regions like Indian sub-continent, China, SE Asia and the Middle East. All these regions are extremely promising in terms of manufacturing sector and infrastructure development projects. With China producing and consuming around half the quantity of metals produced in the entire world, naturally the focus of minerals & metals industry slowly shifted to Asia. In other parts of Asia, numerous infrastructure projects were successfully implemented which consumed a huge quantity of metals.
Today, world’s growth engine seems to have slowed down. China is trying to close down the outdated capacity, Middle East region’s infra projects getting on hold due to depressed oil prices followed by liquidity crunch and SE Asia not showing the expected growth rate of the industry. Overall the situation is far from satisfactory. India has its own set of problems. The present government till now could not pass the land acquisition bill which would have facilitated Greenfield expansion programs of metals sector. This situation has in a way restricted the free growth of metals sector in the country. Two years back it was non availability of ore and coal which was the main hurdle in the industry’s growth. The Supreme Court had imposed ban on the mines in the states of Karnataka and Goa which drastically affected the availability of this vital input. Now, even if the availability of ore has improved, it is the demand stagnation which has emerged as a new problem. The capacity utilization of Indian mills has improved from last year but still in my opinion the average may not exceed 75 %. Needless to mention that such low average would also affect the bottomline and put severe pressure on finances.
Overall its testing time for metals sector, globally, in Asian region and in India too !
As we all know, non-ferrous metals sector and foundry are very vital in the growth of various industries and the same is true for India too. Also, it is a fact that aluminium has emerged as the single most important metal due to its non-corrossive nature, weight to strength ratio and aesthetic look.
Automobile, construction, transport and engineering are the prominent user sectors worldwide and as far as India is concerned, automobile and construction are very important ones. Conventionally, most of the automobile parts and components were made of steel (rather special steels) but in last few years, the auto industry is going through a big transition. Huge importance is being attached to fuel efficiency, aerodynamic shape and aesthetic looks. Also, there is ever growing price pressure from the buyer. In line with this thought process, many steel components are being replaced by aluminium and off late by composites also. Further, in aerospace industry, the properties mentioned above become far more important and a lot of aluminum alloys are being consumed there. Now a day, even magnesium alloys are being employed for weight consideration.
In other sectors like construction, transport and engineering, a lot of new applications are being developed to suit the requirements and expectations of the consumer.
I do agree that in intial stages, society needs steel to build the infrastructure but it is seen that as the society gets developed, it consumes more and more of non-ferrous metals. While enhancing the purchasing power of the consumer is the function of overall economic growth, our industry should concentrate on developing new materials and applications for today and tomorrow. For this to happen, a very strong linkage has to be developed between the industry and academic / research institutes. In developed world we see that a lot of such institutes and projects are being funded by the industry. In fact, most of the research projects are guided by the industry needs and the expectations. Also, there is a definite timeline for every research project.
Such timebound and application directed research can surely help the non-ferrous metals industry to aquire more space into its user sectors and help them to meet the ever growing demands of the end customer !
If we look at the last few years, the consumption of non-ferrous metals has increased steadily. The logic is quite simple. In the begining, any society needs strong infrastructure which is obviously provided by none other than steel. But as the society progresses, its needs also enhance in terms of aesthetic looks, intricacy and diversified applications.
This is why now a days in construction industry, though steel provides the basic strong infrastructure, we see more use of aluminium for the above reasons. Automobile industry case is very interesting. There is tremendous pressure on this industry to reduce weight of the vehicle, increase fuel effeciency and also develop aerodynamic shapes. Many engine parts which were previously made of steel are now been made of aluminium. It is estimated that around 10 % parts by weight are getting converted to aluminium from steel every year. Similar is the case of vehicle bodies and other parts. Here the latest trend is to use composites in place of any metal being used previously. We all know that weight plays more important and critical role in aerospace and telecom industry. Now a days, along with pure metals, a lot of components are being developed out of aluminium and magnesium alloys which are able to reduce the overall weight of the equipment substantially.
While I see a very bright future for non-ferrous metals industry on a long-term basis, the industry is presently facing a rather tough situation. We all know that the metal demand in the developed world is almost stagnated and Asian region including China, India and the Middle East is serving as the growth engine for the global manufacturing sector. With China trying to reduce the overheating of their economy and the Middle East economy hit badly by the oil price crash of last year, India seems to be only promising economy today. Here also the demand is not growing as per expectation and the major metal user sectors like construction, automobile, transport, engineering are witnessing a slowdown. The Demonetisation has also played its part and the GDP growth estimations have come down from 7.6 % to 7.1 % on annual basis.
I do agree that these figures are way ahead than the growth estimates of other regional economies but the fact remains that there is still tremendous untapped potential in Indian economy and I only hope that it steadily comes out in 2017 and the years thereafter!
Global metals industry continues to remain under stress but it seems that the stress is gradually reducing.
For the last few years, most of us believed that the future of western world countries (or developed world countries) is not so bright as compared with countries in Asian region. It was argued that the economic curve for the developed countries has already been platued and there is not much possibility of further economic growth. The regions like EU, US also manifested similar situation with mostly stagnated or falling economies. But now it seems the situation is taking a turn. The US economy seems to be doing better for the last few months and today the industry sentiment is quite positive. Of course, nobody is very sure about what policies the new president Mr.Donald Trump will adopt but it is believed that he will be industry friendly. Similarly, EU is also showing signs of marginal recovery and the industry sentiment is bit positive than the last year. This in my opinion is a big change in that region. Industry analysts expect EU’s economy to improve marginally in 2017 and 2018.
In last few months, many countries have imposed anti dumping duties on cheap imports, especially from China. This has surely helped the domestic industry to consolidate its position. India’s position remains strong amongst this turbulant time. The economy seems to be on track. The auto industry has been performing better than the last year and most of the segments like passenger cars, utility vehicles, scooters have been showing impressive growth rates. This will surely give a boost to castings demand. Also, if the western world’s economy improves in coming years, exports may also increase. Further, many auto components, which were earlier made of steel, are now being made of other materials including aluminiun. This is expected to reduce the vehicle weight and improve fuel efficiency. With added emphasis on infrastructure, making of smart cities and projects like metros, non-ferrous metals will definitely see better days in coming years.
Yes, there is a temporary setback to the demand side due to demonetisation of currency notes but experts feel that this should get over by the year end and things will be more or less normal.