Editorial – November 2024

Editorial – November 2024

The metals industry in India is dwelling on a strong foundation and is poised for decent growth for at least a few years. As mentioned many times in this column, the economic growth of the country is dependent on and driven by infrastructure development, and metals are at the center of the infra development process. Thus, if the country has to grow on the economic front, it must emphasize infra projects, which will ensure an upward pull in metals demand.

Though this is true from a long-term perspective, in the short term, the metals industry seems to be struggling. We also see relatively low performance in the auto sector, which will negatively impact castings demand. Generally, in the past few years, it has been observed that metals and castings demand gradually picks up after Diwali and remains high until the fiscal year-end, i.e., until the end of March. The reasons are simple. During the monsoon, construction activity slows down considerably, leading to a decrease in metals offtake. This phenomenon reverses after the monsoon is over. Additionally, year-end target pressure gradually increases in every company (including automakers), which also gives an upward push to demand. However, this year, metals demand seems to be following a different pattern. Why is this so?

Firstly, let us accept the fact that international geopolitics has a definite and sizable impact on businesses, industrial activity, international trade, etc., and this holds true for the metals industry as well. Today, the international situation is very delicate. The Ukraine-Russia war, as well as Israel’s conflict with various groups and countries, has made the situation in the Middle East quite unstable. This has caused the economies of many countries to tremble and has also affected international trade in the metals sector. Another factor is India’s neighboring countries. Most of these countries, including Bangladesh, Pakistan, and Sri Lanka, are struggling on the economic front. India used to have sizeable trade with these countries, which has now reduced considerably. In my opinion, these are some of the factors responsible for the current low performance of the domestic metals sector. Another factor is the ‘green’ revolution in the industry. This is also expected to reduce international trade, especially in the EU region. We have discussed this in detail in this column before. Though India has registered its protest against the implementation of CBAM, most Indian mills are, at least as of today, not in a position to monitor and substantially reduce their carbon footprint before 2026.

Anyway, the long-term future of the industry remains bright, and I am sure this temporary phase will end soon. Maybe a regime change in the US will trigger the change!

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top