The metals sector in India seems to be slowly gaining momentum. Metals consumption and demand are growing steadily which is reflecting positively on capacity utilization of manufacturing and processing plants. The price curve too is showing a gradual increase which means the conversion margin at every stage is reasonable.
Though metals user sectors such as infra, construction, auto, engineering are putting up impressive performance month after month and are providing support to the demand curve, in my opinion, this is not enough to have a sustainable growth. The real and biggest trigger for metal and metal components demand comes from mega infra projects undertaken by the centre or state government and this has not yet picked up as expected.
The foundry sector, which forms an important part of metallurgical industry and which is the backbone for the auto, engineering and mining industry, is doing exceedingly well. Today, India produces around 10 million tones of castings in comparison of China producing more than 40 million tones. We all know that Indian economy is now gearing up for its fastest growth period. The GDP growth rates of last two quarters were 7.5 % and 8.2 % and one would not be wrong to expect a similar growth for the future. It is also expected that along with the expansion of the economy, the demand for non-ferrous metals and castings will also rise. Today most of the foundries are working in full swing and also looking forward to expand their capacities.
We all know that in the last few years, the dependence of Indian foundries on exports has reduced to some extent. Infact, the stagnation of Eurozone and the slow progress of the US economy has compelled Indian castings producers to look for alternate markets. Now, African region, SE Asia are emerging as potential export destinations but the main trigger for the castings production is provided by the boom in domestic markets.
Experts predict that the castings production may triple by the end of the next decade, i.e. by 2030. Well, if the Indian economy continues to expand at a near double digit rate for this period, there is a strong possibility that the castings demand will rise substantially. Even if one considers advent of electric cars by that time which are expected to consume lesser number of castings, the argument in favour of foundry sector is that the other emerging user sectors such as defense, aerospace, power etc. will more than compensate this loss. Of course, when the industry aspires to triple its production, it must pay attention to a lot of parameters. Raw material availability, supply of power and finance at reasonable cost and most importantly, the availability of technical manpower. Even today, it is very difficult to get such qualified manpower for metallurgical and especially foundry industry. There are very few technical institutes having relevant courses and even the new generation is least interested in working for a metallurgical enterprise dirtying their hands.
The road seems difficult if not impossible !