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Indian Foundry Industry on Growth Path Indian ... - Metalworld.co.in

In-Focus

ong>Indianong> ong>Foundryong> ong>Industryong>

on Growth Path

The foundry industry in India has been growing steadily over the

past several years despite economic slowdown dented its

demand from the end user industry i.e. engineering and auto

component sectors. Generally, moving in tandem with the growth of

the country's economy, the ong>Indianong> foundry industry has surpassed

India's GDP growth with a wide margin. While India's GDP growth

has been witnessing between 5-8 per cent in the last few years, the

foundry industry has recorded a growth of around 15 per cent due to

increasing demand of vehicles from tier II and III cities.

Introduction

The foundry industry is labor

intensive and labor costs in India are

some of the lowest in the world. Also

constructing and registering new

casting facilities are quicker and cost

effective. Regulations governing

Environment, Health and Safety for

foundries are nearly non-existent, and

cost of dies and tooling are

significantly lower than in developed

countries, although tooling quality may

not be as good. As per industry

associations, casting production

capacity to touch 10 million MT by

2012, and additional investment of US$

2bn required to achieve this growth.

Opportunity in domestic as well as

export market makes hi-tech foreign

players to collaborate with local

manufacturers. There is a possibility of

20

February 2013


In-Focus

Type of Castings

Grey Iron

SG Iron

Malleable

Steel

Non-Ferrous

TOTAL

technology collaborations to bring

local suppliers up the value chain and

cater to newer markets. Then there are

s e v e r a l p r e m i u m c a r s a r e

manufactured in India such as Audi,

B e n t l e y , B M W , C h e v r o l e t ,

Lamborghini, Mercedes, Rolce Royce,

Volkswagen. These companies are

consolidating their operations and

vendor base, global casting and

component companies trending to

follow their customers to destinations

like India. India offers several

operational advantages to casting and

component manufacturing companies.

Even as the ong>Indianong> ong>Foundryong> industry

is growing at a healthy rate of 15 per

cent annually owing to increasing

share of local manufacturing in the

GDP and strong demand from

international markets, the supply of

iron ore, the principal raw material for

foundries, has become a major cause

for concern with mining in Karnataka,

Goa and Chhattisgarh facing severe

i m p e d i m e n t s . T h e s u p p l y o f

uninterrupted power in all the major

foundry clusters of West Bengal,

Karnataka, Punjab, Tamil Nadu, and

Gujarat, is poor. In Tamil Nadu,

foundries are being forced to run just

one shift per day. Besides, every year,

the power tariff is going up

significantly. The ban on mining of iron

ore in Karnataka and Goa has impacted

the supply of high grade iron ore for pig

iron. The foundries being MSME units

are not in a position to secure supplies

from far off states, as it will

significantly increase the cost of

production. For the next five years, the

India ong>Foundryong> industry will be on the

growth trajectory, reaching an all-time

high of 20 per cent. The scope for

growth is tremendous. Unfortunately,

poor supply of iron ore and erratic

power supply to foundry units are

seriously impacting the growth of the

sector.

PRODUCTION IN MILLION TONNES

2009-10

2010-11

5.05

0.8

0.0602

0.88

0.653

7.4432

6.18

0.984

0.0692

1.07

0.75

2011-12

6.798

1.09

0.066

1.14

0.9

9.0532

9.994

Domination by Unorganised

Sector Players

The ong>Indianong> Metal Casting (ong>Foundryong>

ong>Industryong>) is well established &

producing estimated 9.99 Million MT of

various grades of castings as per

International standards. The various

types of castings which are produced

are ferrous, non ferrous, Aluminium

Alloy, graded cast iron, ductile iron,

S t e e l e t c f o r a p p l i c a t i o n i n

Automobiles, Railways, Pumps

Compressors & Valves, Diesel

Engines, Cement/Electrical/Textile

Machinery, Aero & Sanitary pipes &

Fittings etc & Castings for special

applications. However, Grey iron

castings have the major share i.e.

approx 68% of total castings produced.

There are approx 4500 units out of

which 85% can be classified as Small

Scale units & 10% as Medium & 5% as

Large Scale units. Approx 800 units

are having International Quality

Accreditation. Several large foundries

are modern & globally competitive &

are working at nearly full capacity.

Most foundries use cupolas using LAM

Coke. There is growing awareness

about environment & many foundries

are switching over to induction

furnaces & some units in Agra are

changing over to cokeless cupolas.

There are an estimated 5,000

foundries in India producing castings of

Grey Iron, Ductile Iron, SG Iron,

Malleable Steel, Non-ferrous and Steel

totalling approximately 9.9 million

metric tons annually. The industry

employs 500,000 people and indirectly

about 150,000 people. India's share in

the global market is approximately 10

per cent of 91.67 million metric tons.

India is the second largest producer of

foundry-based castings while China is

the market leader with 43 per cent

(39.6 million metric tons) of the total

output. In India, majority of the

Foundries are placed under the Micro,

Small & Medium Enterprises (MSME).

The ong>Foundryong> industry has been

consistently growing at a rate of 13 per

cent to 14 per cent since 2001 except

in 2008-09 (12 per cent) because of

global recession. A recent study

conducted by the World ong>Foundryong>

Organization (WFO), revealed that the

worldwide casting production

increased by 13.7 per cent (91.4

million metric tons) whereas India

showed a growth by 22 per cent in

2010 primarily because of new

projects and increase in local demand.

“The total requirement of castings is

about 20 million metric tons in India per

year. There is a projected gap in the

supply and the demand of castings. The

ong>Indianong> foundry industry can look

forward to accelerated growth for

many years to come as the existing

foundries have started investing to

increase their productivity and

capacity,” observed Mr Vinod Kapur,

Vice-president, World ong>Foundryong>

Organization.

The government's focus on

increasing the share of Manufacturing

in GDP; the new Manufacturing Policy

aimed at enhancing the creation of new

jobs; the Automotive Mission Plan

2 0 1 6 ; a m b i t i o u s p l a n s f o r

infrastructure development and power

projects in the 12th Plan (2012-17);

and the gradual shift of manufacturing

to India for global operations of various

OEMs are the growth indicators for the

ong>Indianong> ong>Foundryong> industry. “Other than

local challenges, India is facing

competition from China, Japan and

Brazil. ong>Indianong> foundries have to adopt

the latest environment-friendly

technologies to further consolidate the

position and enhance production,”

added Mr C.R. Swaminathan,

Chairman, an industry veteran.

“ W i t h t h e p r e s e n t m a r k e t

paradoxes of 'high growth coupled with

sudden low demand', it is imperative

22

February 2013


PRODUCTION OF CASTINGS

Year

Quantity (mt)

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

3.12

3.16

3.51

4.04

4.62

6.06

7.17

7.77

6.84

7.44

9.05

9.99

that the Asian ong>Foundryong> ong>Industryong>

deliberates and takes a considered

view on how to Sustain the industry

through the upheavals in the market

and in the business environment along

with the demographic challenges,”

added Mr N. Krishna Samaraj,

Chairman, Asia ong>Foundryong> Forum. The

USA and the European Union are the

biggest markets for castings products.

However, because of the financial

crisis in the Euro Zone, the market is

weak. There are new growth

opportunities, especially in specialty

castings for power sector, including

thermal (Ultra Mega Power Projects),

Nuclear power; Renewable Energy &

Automotive Sector (light-weighting of

automobiles). “The scope for

enhancing the ong>Indianong> share in the

global market is significant. Unless the

government ensures uninterrupted

supply of power and iron ore, the

ong>Foundryong> industry will not be able to

enhance production,” pointed out Mr

R.V. Gumaste, Managing Director,

Kirloskar Ferrous Industries Ltd, one

of the largest foundries in the country.

Exports Trends

The Exports have been showing

healthy trends approx 25-30% YOY as

can be seen from the charts below. The

CASTING EXPORTS

Year

Realisation (crore)

2009-10

2010-11

2011-12

6672.94

8729.16

11745.63

current exports for FY 2011-12 are

approx Rs. 11745 Crore. However, in

2012-13 the exports are likely to

slowdown due to weak demand.

Typically, each foundry cluster is

known for catering to some specific

end-use markets. For example, the

Coimbatore cluster is famous for

pump-sets castings, the Kolhapur and

the Belgaum clusters for automotive

castings and the Rajkot cluster for

diesel engine castings.

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