Handtool exports projected to fall by 20%

Representatives of the Engineering Export Promotion Council say that the export of iron and steel should be stopped immediately to arrest the fall.

Handtool export growth from the country might be negative in the last fiscal (2007-08) due to continuous increase in the price of steel and other raw materials. Experts believe that exports will witness negative growth of about 20 per cent from the previous fiscal.

In 2006-07, handtool exports from the country were to the tune of Rs 828 crore, compared to Rs 909.32 crore during the previous year, a decline of 8.94 per cent. In 2005-06, however, handtool exports had registered a growth of 16.80 per cent over the previous fiscal.

In the last fiscal, handtool exports are expected to be around Rs 662.40 crore, according to the analysts, thus witnessing negative growth of 20 per cent over the previous fiscal year.

The decline in exports is mainly due to significant increase in prices of raw materials used in the industry. Further decline in exports will mainly affect industries situated in Punjab (especially Jalandhar and Ludhiana as these are two main centres).

The state alone contributes 80-85 per cent of total exports from the country. In Punjab, there are about 400 units dominated by small and medium enterprises (SMEs) engaged in production of handtools. In the past year, around 50 units have already closed operations or diversified and it is expected that if the trend continues many more would follow suit.

The poor state of the industry can be gauged from the fact that the Indian exporters of handtools from Jalandhar and Ludhiana who had gone to participate in the bi-annual Cologne Hardware Show in Cologne, Germany, failed to grab significant orders due to fluctuating raw material prices.

In an interaction with Business Standard, Sharad Aggarwal, convener hand tools panel, Engineering Export Promotion Council, said: "In the last few months, price of Ingot steel, steel flat and other material has gone up substantially. This has affected the entire engineering industry which is a major user of iron and steel. In fact, iron and steel prices rose continously last year."

He added that last year, the price of Ingot steel was Rs 20,000 per tonne, while this year, it's price had risen to Rs 36,000 per tonne. Similarly, the price of steel flat which was priced at Rs 24,000 per tonne last year is now priced at Rs 41,000 per tonne.

He added that iron and steel constitute 60-65 per cent of the total cost of production of hand tools. Every 10 per cent increase in iron and steel prices adds nearly 6 per cent to the cost of handtools. Because of a sharp increase in input costs, especially iron and steel, the growth of the industry has become negative and further the industry which used to run 24 hours a day(3 shifts) now runs only for 8 hours a day(1 shift).

He added that there was a huge difference in prices of raw material between India and China.

"If nothing is done we will loose this industry to China. The raw material prices are higher in India as compared to China, and if the government fails to take any steps to control steel prices, the industry will be in a shambles," he said. 
 

STEEL PRICE COMPARISON AS ON APRIL 3, 2008 (IN US DOLLARS PER TONNE)
S.No.	Category	Delhi (India) (Including   VAT and  Excise)	Shanghai (China)   (Including   17 % VAT)	Exports,  FOB-  Shanghai
1	HR Coil	1206.43	741-749	860-880
2	Billet	1022.81	705-712	870-890
3	Pig Iron	850.42	606-613	N.A
4	CR Coil	1275.64	912-927	920-950
5	Wire rods	1250.62	710	850-880
Source: China prices are from the daily prices published in Steel Business Briefing

On preventive measures Aggarwal said: "The export of iron and steel, which has been growing rapidly (a growth of 49.13 per cent in 2006-2007, as compared to corresponding period the previous year) should be stopped immediately."