Forgings firms ride energy sector boom

The Rs 1500 crore forging industry in the country is poised for 25 per cent growth in the years ahead, on increasing demand from chemical, oil and gas sectors aimed at meeting the energy needs especially in the developing world.

Developing countries such as India has a tremendous requirement for forging products including ss forged flanges, seamless stub ends, chokes and bonnets, which are largely used for carrying oil and gas, hazardous chemicals, inflammables and so on.

Being an energy-scarce country, India needs ample new forging capacity to meet the rising demand from the oil and gas sector. The demand for forging products has been increasing at the rate of 20-25 per cent during the last 6 years, with the last year witnessing a growth of 58 per cent.

The industry, comprising 330 odd units and a production capacity of 10 lakh tonne, has been divided into four major sectors, large, medium small and tiny. According to estimates, only 9-10 plants are categorised as large units. These constitute more than 80 per cent of the total production of the industry. The medium and small sectors consists of about 100 units and remaining units belong to tiny sectors.

Many European companies have tied up with Indian companies to source flanges, chokes and bonnets for meeting their customer requirements.

"The western countries have reduced their manufacturing activities substantially to the tune of upto 20 per cent due to high production costs. And not to mention, countries like India and China are going to reap the benefit of it," said Yuvraj Malhotra, chairman & managing director of Hilton Metal Forging Ltd.

Owing to low labour costs, the Indian-made products are about 40 per cent cheaper than their European counterparts. This economics is pulling European forging manufacturers towards the developing countries such as India, Malhotra added.

Increasing globalisation is transforming the forging industry from labour-intensive to capital-intensive mode. The total investment in the large and medium sectors is estimated to be around US $600 million.

The small scale units too are increasing their capital investments to keep pace with the increasing demand, especially in the global markets. Many are now supplying to Original Equipment Manufacturers in the automobile sector.

The forging industry has been flourishing during the last few years, with the overall production having increased by 27 per cent to about 9.29 lakh tonne in 2005-06.

Capacity utilisation also improved considerably from 40-50 per cent in the previous years to 85 per cent, taking the total production to 1.5 million tonne. This is thanks to a revival in the automotive sector, especially an upsurge in the demand for passenger cars.

Exports recorded a growth of almost 27 per cent in 2005-06, reaching US $310 million.