Automobile industry in the country as well as globally is passing through a huge transition and perhaps in few years time, the meaning and manifestation of ‘mobility’ will be altogether different !
The last few years saw an enhanced consideration for aerodynamic models, fuel efficiency, impact resistance etc. This led to a gradual shift of some component materials from steel to aluminium and even to composites. Although steel is the most important material and cannot be replaced due to its high strength and impact resistance, the non critical parts have shifted to other materials. This was the period when all the major automakers built their manufacturing facilities in India. This gave a big boost to foundries and auto component industry in the country and India slowly emerged as auto and auto component manufacturing hub for global consumption.
Now, the next generation mobility will employ new technologies and processes like 3D printing and Industry 4.0 and gradually our roads will be flooded with first hybrid cars (which can use fossil as well as electricity as fuel) and then electric cars. Driver less and ‘connected’ vehicles are also not very far. Tesla electric cars are already on the road in the US and have become very popular in a short time span. Industry analysts feel that this change will not be sudden and it will take 7 to 10 years for the industry to completely shift to electric cars, though hybrid cars will become popular in next few years.
This transition in automobile industry will impose a great impact on metals sector. It is obvious that an electric vehicle will have only few metal parts and will consume very less castings as compared with today’s requirement. India’s foundry sector is third in the world ranking in terms of volume (only after China and the US) and produces around 9 mt of castings per year. Its fortune is thickly connected with auto sector and is expecting a double digit growth rate in coming years. With these new developments in auto industry, the long term fortune for foundries look bleak. Will these new structural changes in auto industry have a big dent on foundry and auto component manufacturing sector ? Do we have to look for and develop markets other than auto sector ?
Though 7 to 10 years is a rather longish time frame, we have to address this issue now..
The debate about benefits or shortcomings of demonitisation, implementation of GST is going on nationwide is a truly welcome sign. I am sure Indian economy would mature by these discussions and would move ahead with more zeal in coming days.
As regards metals industry, as long as the economic wheel is running with a reasonable speed, it will keep creating metals demand. Fortunately auto sale figures are impressive for the last few months, thanks to good monsoon which triggered the sale of tractors. This has positively impacted foundry sector and their capacity utilization has improved substantially. Also, they have started planning forward with great expectations from the future. Not only the casting units but the whole vertical as such is in vibrant state.
For the last few years, the demand for primary metals seemed to be stagnated but now it seems that the things have started moving. With metro rail projects in many cities, road building on fast track and also other infra projects the requirement of metals is going to increase manifold. The demand curve has started moving up a bit and this has made primary metal producers optimistic. Few have restarted their expansion plans and the industry sentiment has improved considerably.
Amongst all these happenings, there is one distinct good news for India. World bank monitors a parameter called ‘Ease of doing business’. Till now India ranked 142 on a global level but now her position jumped to 100. It’s a really huge leap, probably the biggest one in one year for any country. For the last few years, India was seen as one of the fastest growing economy and many overseas companies were eyeing on her huge marketplace and wanted to participate in this growing economy. Now with improved ease of doing business in India, I hope there will be more inflow of not only companies but also the investment from international financial institutions which is very vital for building a solid infrastructure in the country.
I would not like to take any side on demonitisation or GST implementation but I strongly feel that India is changing, and changing for better !
The Indian metals sector seems to be in somewhat better shape now. Last few years were particularly challenging for everybody as demand seemed stagnated coupled with raw material crisis. Now, if you look at the quarterly reports of major metal companies, they have started increasing the production. Today, their position is comparatively better than the last year. Atleast they can expect a gradual rise in the demand in coming months. The raw material crisis is also mostly resolved and the availability of ore, coal has improved substantially. Many experts prefer to describe such a situation ‘new normal’ instead of ‘recession’. No, its not only word play. What it means is that now one has to get used to such industry environment where making profits may not be as easy as it was before. One has to be really innovative and articulate to do so. This situation is not a temporary passing phase but a long term reality.
The world around us is changing very fast. Our industry too is feeling the heat and will be undergoing a tremendous transformation in coming years. This transformation is multi dimensional. The technologies like 3D printing are going to re define the auto industry while technologies like robotics, cloud computing, virtual reality, augmented reality are going to completely change the way businesses are being done. I am very sure that many giants of today will face a tough time tomorrow and few of them will even perform a vanishing trick. New business models will emerge. We know today that the biggest taxi company in the world does not own a single vehicle. It were mobile companies which saw the downfall of music and camera companies. In today’s time, one should expect the most unexpected to happen. Auto industry is really heading towards a big transition and as a natural consequence, auto component industry, foundry industry is bound to undergo a huge churning.
Most of the Indian metal business houses are under tremendous finance pressure and few of them are looking for buyers, investors etc. Many companies want to expand the capacity and tap the additional demand expected to be generated but lack the support of financial institutions. Already, there is a talk of mergers, acquisitions and re-structuring of the industry. Looking at all this, I definately see a big fundamental change just round the corner !
For the last few years, global metals sector is passing through a rough period and the same is true for India.
On a global level, demand stagnation is the major concern. The developed countries and regions have already reached a plateau as far as infrastructure development is concerned. Thus their metal appetite is naturally low. In other parts of the world like Asian region, availability of raw materials, availability of finance coupled with demand stagnation is the issue.
In Indian context, for the last few years demand stagnation along with raw material crisis has restricted the growth of metal sector. It has also affected vital numbers like demand growth, bottomline, capacity utilization etc. All this resulted in value erosion and placing many companies in the red.
Now the situation has started tilting towards positivity and there seems a slight increase in the demand, a huge increase in industry sentiment due to good monsoon in most of the parts and some forward planning too. Nobody doubted India’s growth potential on a long term basis but till now the ground reality was not supporting this thought line. Now with slight increase in demand and somewhat better performance of metal companies, there is a huge optimism in the industry.
Unfortunately financial institutions have a different take on this. As per them, they have invested very big capital in the metals sector out of which substantial part has become or on the verge of becoming NPA. Further, metals industry is subjected to cyclic ups and downs which are very difficult to absorb. Lastly, even in best of the times, the margins of the industry are not so attractive when compared to other verticals like IT, Biotech etc. Thus it is very difficult to support this industry beyond a certain point.
In such a situation when the industry is looking up and needs capital for further capacity expansion, we have to find some solution bringing all the stakeholders together. It’s a huge task and requires support from every corner, the most important being from financial institutions !
Metals industry continues to have challenging times in most parts on a global level. Eurozone continues to be stagnated, Middle East region showed a little forward movement when oil prices started moving up but now with oil prices steady at a lower level than expected, the industry and the economy in ME region seems to be halted. South East Asian countries are again witnessing a tough time. Their economies have great influence of their Chinese counterpart and now they are exposed to a dynamically changing policy situation. As we all know, now for last so many years, the key player in metals sector is China. In global steel industry, material availability, pricing and other parameters are being greatly influenced (if not decided) by Chinese industry. In this global fluid situation, India seems to be better poised to attract investor’s attention because of its steady economic growth.
Indian metals sector has also gone through a very challenging time for the last few years. They have seen shortage of vital inputs like ore, coal etc, closure of mining activity by the supreme court orders, continues demand stagnation etc. But now the situation is changing, though slowly but definitely. The demand seems to have started climbing up. This may be due to forward movement of mega infra projects in the country. This will boost construction activity and in turn help the products like aluminium extrusions, wires etc. Also, better road condition is facilitating auto industry growth which in turn helps castings demand to grow. Fortunately this year monsoon is quite satisfactory in most of the regions in the country. This will have a direct, positive and immediate impact on agro equipments sector, tractor sale etc. Further, good crops will increase the purchasing power of the common man whereby helping the economic wheel to move faster. This will obviously help the metals sector to grow. It is expected that the introduction of GST will bring many business transactions in the mainstream economy and will support the growth of GDP.
Overall, I feel the metals sector will make some lost ground in coming months and as such the fiscal 2018-19 will be a better one than 2017-18.
Last few years were quite challenging for the metals industry. On one hand the demand did not rise up to the expectations and on the other hand, the cost of vital inputs was on the rise. Most of the developed world countries are going through an economic slow down and this suppressed the growth of the industry too. Many infrastructure projects were on hold due to liquidity crunch. As we all know, infrastructure and the construction together give the biggest trigger to the metals demand. Thus this situation results naturally in lower metal demand.
Indian story is slightly different. India too had its share of challenging days but fortunately the Indian economy showed up a comparatively good performance and this naturally helped various industry verticals including that of metals. Secondly, the Indian auto industry did fairly well in these testing years which helped foundry sector to survive. Actually, lot of foundries expanded their capacities in anticipation of good export opportunities to European countries but this thinking was proved wrong by the struggling economies of most of the countries in Eurozone. Today, most of the Indian foundries are aiming for domestic markets rather than exports.
Today, if an investor has to put his money, it is but natural that he will strongly consider Indian economy. Auto sector is progressing well, the speed of infrastructure development has also picked up to some extent, most of the raw material issues are sorted out and most importantly, majority of people believe that the Indian economy will continue to grow at a decent rate. Thus there is a strong reason to bait on India’s prospects. Further, introduction of GST will also have some added attraction about Indian economy. After initial teething problems, it is expected that the tax structure will be more simple, transparent and more industry friendly. In fact, from the last few months, the foreign direct investment (FDI) has already started scaling up in anticipation of GST regime.
I hope the positive sentiment in the industry continues and the metals industry in particular benefits from the economic progress and the infrastructure development.
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 !