Exciting times in India's Foundry sector, the 2nd largest producer of castings worldwide!
The mood at the traditional foundry belt of Howrah in West Bengal, once known as the 'Sheffield of India', is palpably upbeat. And there are more reasons than one for that.
Firstly, the Indian foundry industry is on a much better growth path now and has already registered five per cent to seven per cent growth rate per annum. It is expected that the momentum would be kept up in the coming years as well, if Indian Institute of Foundry-men (IIF) is to be believed. here
Secondly and quite significantly, India has overtaken the United States to emerge as the second largest producers of casting, behind China from last year. The production in the country stood at 11 million tonne, valued at $19 billion in 2017, behind China, which produces 40 million tonne.
That’s not all. With more focus on fuel efficiency and EVs, the demand is shifting from iron to lighter castings. More than 40 per cent of the castings are for the automobile sector and it is expected to record growth for another couple of years. Infrastructure activities have also picked up leading to more demand for castings used in machinery.
Thirdly, the GST rollout in India has had a positive impact on the industry, generally.
And last but not the least, after trying out in China and Turkey, hundreds of metal casting units (commonly known as foundry) in and around Kolkata, the oldest foundries in the country, are now looking towards Japan to bring in cutting-edge technology and eco-friendly techniques.
This area, at present has nearly 320 metal casting units which belong mostly to small and a few to medium scale has more than 6.8lac MT of installed capacity. Annual production of 6lac MT of these includes sanitary fittings, Railway components/spares, other transport components etc. Apart from domestic market the castings are also exported to overseas markets in the US, Germany, the UK, New Zealand and Middle East.
Raj Kejriwal, managing director, KISWOK Industries Pvt. Ltd, said that it’s high time Indian foundry industry explores and brings in green foundry concept here. “If we can achieve that it will prove to be a giant leap in making a marked development in the foundry industry in Bengal, Jharkhand and Gujrat, especially the medium and large scale enterprises. We are keen on imbibing what is best for the industry and contribute to the success story of Eastern region,” said Kejriwal. Interestingly, Indian Foundry Industry is the 3rd largest globally and is expecting an investment of $3 billion while the National Steel Policy has envisaged steel production to reach 110 million tonne by 2019-20.
Kejriwal is not alone. Others in the business are equally bullish over the way things are moving now. Sunil Sharma, director, Sintokogio, Ltd, said that the good thing is that Indian foundries are now gearing up to get energy saving modern technology and material resource saving techniques that would, in the long run, help in mass productivity as well as improvement of working environment. Some of the units have already set the ball rolling. There are foundries which have got a first-hand experience of the ‘vacuum Process’ castings which was developed and patented in Japan in the late 1970s. The process involves very low operating cost, unlimited pattern life cost, zero degree draft, with excellent dimensional tolerances, defect-free casting with smooth surface finish, he pointed out.
With such overall positive sentiments, exports are soaring up as well. In fact, exports of casting products from India have already registered 4 per cent-5 per cent growth, reaching $2.7 billion in value terms. However, the potential to grow is much higher. Atleast that’s what IIF president Amish Panchal feels.
“The foundry sector, which employs about 2.5 million people, needs to grow at least three-fold in the next 10 years, There is scope for employing an additional 2.5 million people if the industry grows at a rapid rate in the next three to four years. And the sector has the potential to grow that high,” said Panchal. And that high expectation is not without a reason.
Aluminium castings contribute nearly 15 per cent of the total casting production in the country and the segment is likely to grow further as automobile manufacturers are focusing on reducing weight of the vehicles, including engines and doors. With more focus on fuel efficiency and EVs, the demand is shifting from iron to lighter castings.
Realising the potential of the sector, IIF is in the process of commissioning an impact assessment study of EV (electric vehicles) mobility on casting demand. It had invited bids from agencies and the report was expected to be ready in the next three months.
Panchal said that the foundry sector in the country recorded 5 per cent to 7 per cent growth in 2017, thanks mostly to the thrust from automobile and infrastructure sectors. India was now the second largest producer of castings globally next only to China and produced 11 million tonne of castings in 2017. More than 40 per cent of the castings are for the automobile sector and it is expected to record growth for another couple of years. Infrastructure activities had also picked up leading to more demand for castings used in machinery. “If this trend continues, we might overshoot the target and see higher growth this year,” he said. And mind you yhat the capacity utilisation at foundries is now at between 60 per cent and 70 per cent. And if the demand rises, the utilisation would also increase.
With things looking up, there are some out of the box thinking also, to give further fillip to the sector. The Institute has already taken the initiative of constructing a test road in rural areas in Rajasthan by utilising waste foundry sand. After trials for two rainy seasons, the project could be extended to other parts depending on the success, if things move the way it has been envisaged.
However, there are some sore issues as well. There are many in the industry said that an abnormal increase of raw material costs and pending GST refunds have become serious issues now. The cost of raw materials including chemicals, iron, other essential goods have gone up by 40 per cent to 100 per cent in the last three months. It is likely to increase further in the coming months, causing more hardships. Similarly, inverted duty structure led to pending of refunds for majority of industries. Although GST has no major impact on the foundry sector, in particular, many manufacturers are yet to get refund of IGST, due to which there is a shortage of working capital. The working capital problem needs to be resolved at the earliest. The sooner the better for the industry!
Otherwise, while most industry verticals maintained that GST implementation had slackened their growth in 2017-18, the foundry industry feels the tax rollout has had a positive impact on it. Panchal clarified, “The industry’s growth was slightly higher at around 6 per cent than the global average of 4-5 per cent. The GST rollout has had a positive impact on the industry. Some level of streamlining has happened. However, the foundry industry encountered two major problems in the course— on account of inverted duty structure and the delay in getting the refund claims by the exporting units, impacting the working capital flow.”
Meanwhile, the ongoing trade and tariff war between the US and China has come as a boon to the Indian foundry sector and India is expected to have an edge on the export front with close to 40-45 per cent of total exports to the US. Indian foundry sector is understandably hopeful of good growth at least for the next decade as its manufacturing competitiveness has changed dramatically and with the Modi government’s thrust on ‘Make in India’ initiative, the sector foresees greater momentum. Since all engineering and other sectors use metal castings in manufacture, the role of the foundry industry is expected to be vital. The export of castings stood at nearly $ 2.7 billion last year and it is expected to grow three times in the next 10 years. The export market share of India’s foundry industry can rise from existing 2 per cent-3 per cent up to 6 per cent-7 per cent, said H Sundara Murthy, President, The Indian Foundry Organization (IFO).
The most significant trend which comes out talking to a number of industry players is that the industry is now aptly focusing on value addition rather than tonnage. The foundry units are investing huge sums on automation and efficient production processes. And that’s the most encouraging trend too.
- TradeBriefs Bureau -