India has bucked the global trend where non-ferrous metals are concerned.3
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A recent report by professional services agency KPMG has said demand for non-ferrous metals, including aluminum and copper was likely to grow around 8% over the next five years.
Titled “India Non-ferrous metals industry: Building the future,” the report added that the expected demand growth in the non-ferrous metals industry would be even better than the “healthy trend” observed in the last five years.
“Over 2016-17 to 2021-22, the demand for these metals is expected to grow by around 8% in line with strong economic prospects, thrust on manufacturing sector, healthy growth in key end-use segments further aided by rising usage intensity,” the report states.
What’s more, the report said India had also registered strong growth in recycling of metals, a major step forward for an otherwise unregulated sector. It said over time, the share of recycled metals had increased considerably and was almost equivalent to the global level.
But KPMG added a note of caution, saying legislative intervention was required to contain the level of scrap imports that still dominated the globe.
It’s no secret that globally, the non-ferrous metal industry faced a turbulent time owing to a number of factors, including the global economic growth slowdown at large, as well as the slowdown of the Chinese economy, in particular, along with the high raw material prices.
But India went the other way.
The KPMG report added that “strong resilience in the Indian economy” had resulted in its non-ferrous metal industry outpacing the global trend. Apart from a strong demand base and future potential, India was rich in terms of raw material reserves coupled with a relatively low-cost structure of production, thereby providing huge opportunity for the development of non-ferrous metals industry in India.
That said, downstream products, such as copper wire and aluminum foils, were still being dominated by imports, as the downstream industry is relatively undeveloped in India.
China, with its sheer population as well as advancement of manufacturing, was the largest consumer of non-ferrous metals and majorly influences the dynamics of the industry. But the recent slowdown in that country has significantly impacted the global industry in terms of supply and demand, trade, prices and profitability. The country accounts for 52% of the global aluminum consumption. In Asia, consumption showed a declining trend in Japan, but was counteracted by higher demand from India and the Middle East. The report said North America had also firmed up since the global financial crisis. Prices had recovered because of supply cuts in China and a healthy demand growth.
In India, with steady growth in demand, non-ferrous metals were being consumed in several emerging applications offered by defense, aerospace, hybrid and electric vehicles, railways, and more, requiring complex design (be it large aerostructure parts or miniature structural components). However, lately there has been technological disruption in multiple industries, including metals, such as metal additive manufacturing or 3D printing, which offered the possibility of complex parts production at a faster pace and lower cost, the report observed. There were a number of industries which were increasingly using these technologies to revolutionize the manufacturing process.
A well-developed non-ferrous metals industry is vital for any developing country, as it provides important raw material to many industries that are the pillars of economic development. With the increasing usage of these metals in several existing and emerging applications, coupled with new technologies, there is a paradigm shift that can change the way non-ferrous metals are consumed in the future.
The KPMG report provides a glimpse of opportunities that are available for the development of the non-ferrous metals industry in India, which is riding strong economic growth momentum.
With a slew of reforms undertaken by the government, the end-use sectors of non-ferrous metals —automotive, electricals, packaging, consumer durables, railways, ports and inland waterways, roadways and renewable energy — were expected to experience a strong growth trajectory.
However, certain metals were characterized by import, especially downstream products such as copper wire and aluminum foils, because of various reasons, including the undeveloped downstream industry, global competition and quality availability.
During 2011-12 to 2016-17, the demand for aluminum posted a CAGR of 5.4% led by a healthy growth recorded by the electrical and automotive sectors, which constitutes 60-65% of the total consumption of aluminum.
Primary aluminum demand was generally met through domestic supply, but there was considerable import of downstream products from China and the Middle East. Many players in the aluminum downstream industry were suffering from a lack of proper infrastructure and technology to efficiently process the raw material into high-quality products.
Significant capacity addition has taken place over the past five years due to implementation of various capacity addition plans by the major players. During 2011-12 to 2016-17, capacity has increased from 1.9 million tons per annum to 4.1 million tons per annum.
Demand for primary copper grew at a CAGR of 14% over the past five years, owing to the robust growth in the electrical sector and consumer durables.
Although India was a net exporter of copper, there was a significant proportion of import of downstream products. Many players in the copper downstream industry faced challenges such as outdated technology, improper infrastructure, high set-up cost, high funding cost and lack of skilled professionals.
During 2011-12 to 2016-17 copper imports, constituting mainly downstream products and alloys, grew at a CAGR of 15.4%.
Demand for primary zinc in India was based on the growth of the steel market, which accounts for 70% of the total demand. It was mainly used in galvanizing and coatings of iron and steel to protect it from corrosion.
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During 2011-12 to 2016-17, demand for zinc grew at a CAGR of only 3%, mainly because of a surge in imports of galvanized steel.
In order to control imports, the government imposed a minimum import duty on certain steel products, in addition to a safeguard duty and anti-dumping duty.
In 2016-17, India’s imports of galvanized and coated steel fell by 47% compared to the previous year as a result of these supportive government policies.
Other government initiatives, such as the Smart Cities Mission, modernization of railways and the construction of highways were expected to boost the infrastructure industry, which uses galvanized steel for durability and endurance.