'Forging industry will witness a flat rate of growth this year'

Forging is the process of applying compressive forces for giving shape to various metals. On a broader level, there are three types of forging — hot, warm and cold forging.

Hot forging is performed at extreme high temperatures as it fills the complicated parts like crank shafts and connecting rods, and such components can be made only by hot forging. Cold forging is performed at room temperature. In India, 80% of the forging units are into hot forging and the rest are involved in cold forging.The Indian forging industry caters to the automotive sector, which accounts for around 70% and the rest caters to non-automotive sectors like solar, aerospace, railways, defence and wind sector.

It is one of the important industries for the success of automobile, power sector and general engineering in the country. The Indian forging industry with over 500 companies provides employment to over one lakh people.

The industry’s products include rough forgings and/or machined parts like crankshafts, connecting rods, camshafts, shifted fork, steering components, crown propeller shafts, gear-box components, crown wheel and pinions, front-axle beams, rear-axle shafts, earth moving link, railway tyres, flanges/pipe fittings, and industrial valves.

The forging industry has been continuously plagued with rising prices of industrial fuel and steel, resulting in rising input costs and shrinking margins. DH’s Umesh M Avvannavar sat down with Muralishankar Sambasivam, Vice President of the Association of Indian Forging Industry (AIFI) — the apex body of the Indian Forging Industry, to understand about the forging industry, which has always been a major growth driver for the Indian manufacturing sector.

What is the current status of the forging industry?

As per the survey conducted by AIFI in 2016, the estimated turnover of the 384 forging units operating in FY2014-15, was Rs 27,835 crore, including Rs 6,100 crore contributed from exports, providing employment to approximately one lakh people in the country. Overall production of forgings increased from 2.11 million tonnes, to 2.25 million tonnes (MT) in 2014-15, and the production figure for 2015-16 is estimated at around 2.45 MT.

With an installed capacity of around 3.76 MT, the industry has a capability to forge a variety of raw materials like carbon steel, alloy steel, stainless steel, super alloy, titanium, copper, brass and aluminium. The overall capacity utilisation of the industry also improved in FY2014-15 at around 60%, against 55% in FY2013-14. Forging production in India is likely to grow at a CAGR of 9.5% for the period of 2015–2018, and reach to 2.97 MT in FY2017-18, from 2.25 MT during FY2014-15.

What is the growth of the industry?

Last year, growth was just 2-3%, but we are anticipating growth and improvement by next year. India is the biggest exporter of flanges to the US and European markets, but with the fall in oil prices and overall oil industry, we did not see much growth. Overall, the forging industry will witness a flat rate of growth this year, but there are enough positive indications in the long term, which will put the industry back on the growth track.

What are the three major challenges that industry is facing?

One of our key challenges is price disparity of raw materials as compared with Chinese and European markets. Prices of major input materials like steel scrap, coke, and iron ore, have dropped by more than 30% globally over a year. Internationally, prices for plain carbon steel used for the forging industry has come down to as low as $390-450/tonne.

Consequently, steel mills across the globe have adjusted their selling prices. It is not only China that is offering competitive prices but also South Korea, Japan followed by others. While on the other hand, the Indian steel prices have not been reduced to that extent which is making the manufacturing of forging and export to global destinations unviable for companies.

The interest subvention is offered by the government to promote a particular industry by waiving off some percentage of interest which is borne by the government. Despite being a crucial part of the manufacturing sector, the Indian forging industry lags behind with other sectors due to lack of innovation and technological upgradation. Therefore, a Technology Upgradation Fund (TUF) interest subvention scheme was proposed for the forging industry.

The other major challenge is inadequate supply of power and increasing power price. Since forging is power intensive, the availability of good quality power consistently at competitive tariff is paramount for competitive operations and global competitiveness of the sector and for supporting manufacturing. Lastly, shortage of skilled manpower.

What is the forging industry scenario in the Southern region of the country?

In Karnataka, there are around 50-60 companies around Bengaluru, Mysuru and Hosur belt. This year, though there was excess rainfall in Northern and Western regions, the Southern states, especially Kerala and Karnataka witnessed deficit in rainfall leading to water shortage. Even in Tamil Nadu, monsoon has got delayed leading to drop in hydel power in all these states which might result in power shortage.

Also, the state government needs to come up with plans to tie over water scarcity in the coming year, which is going to be a challenging situation. Overall, the forging industry will witness a flat rate of growth this year, but there are enough positive indications in the long term which will put the industry back on the growth track.

What are the initiatives taken by the Government of India to boost the sector?

The government’s thrust on manufacturing sector with initiatives like ‘Make in India’ and ‘Skill India’ has definitely created positive economic sentiments amongst the business community. Many global OEMs (original equipment manufacturers) and Tier-I players are setting up purchasing offices in India, and looking at procuring high standard quality products.