India’s prime minister Narendra Modi's Make in India campaign, set up to promote the country as a manufacturing hub for both domestic and export markets, is progressing since it was set up in September. It is intended to boost the production of metals such as steel and aluminium.
Of all manufacturing sectors, automobile and auto components makers – particularly foreign firms based in India – have responded enthusiastically to Modi’s call to produce items in India for domestic and global markets. Honda of Japan, which intends to “strengthen its Make in India resolve” has announced a fresh investment of Rs9.65 billion ($156 million) to raise its capacity to manufacture both motorcycles and cars.
An important component of Make in India’s mission relates to what domestic steel and aluminium producers have to do to meet the increasingly demanding metal quality requirements of the automotive industry. Some Indian steelmakers have teamed up with established automotive steel producers to make metal of the required grades. Tata Steel has formed a technology and equity alliance with Nippon Steel & Sumitomo Metal (NSSMC) and, in September 2014, started producing, for the first time in India, automotive-grade continuous-annealed cold rolled sheets. JSW has built a 2.3 million-tpy cold rolling mill at Vijayanagar, in Karnataka, with technology from JFE of Japan for making high-grade automotive steels.
In the railway sector, the government has promised to increase national track length by 20% to 138,000km over the next five years, spurring investments by existing rail producers. Sail’s Bilhai Steel has ordered a 1.2 million-tpy universal rail mill from SMS Meer, which will be commissioned later this year. The plant will be able to make 520 metre rails by joining four 130 metre sections.
To reduce India’s substantial defence imports, Modi has made defence a focus of Make in India. During a recent visit to Rourkela Steel Plant, where a newly commissioned mill is making 4.3 metre wide plate, he said that increased local defence production, including tanks and warships, would generate “good demand for plates and other steel products”. Defence equipment manufacture has also been assisted by the government's liberalisation of the rules covering direct foreign investment, which has promoted strategic partnerships between overseas and Indian companies in this sector.
High hopes that infrastructure requirements would increase demand for metals have ended in disappointment in the past, and Make in India is addressing this concern. Finance minister Arun Jaitley said in his recent budget speech that the “major slippage in the past decade has been on the infrastructure front. Our infrastructure does not match our growth ambitions.” To tackle this, the budget includes “very substantial” increases in outlays for road building, railway development, port capacity and other infrastructure areas. Five new large power projects of 4,000MW each will generate great demand for steel, aluminium and copper, and boost business for manufacturers of turbines and other power equipment.
However, Indian metal producers may only partly benefit from the rapidly growing consumer home appliances sector. This is because for many appliances, such as microwave ovens, Indian companies are finding imports, particularly from China and some other Asian countries, a more economical proposition than domestic sourcing. Imports are being boosted by progressively lower import duties until 2017, when target rates will be reached. A report by management consulting firm Arthur D Little sees India’s electronics and appliances demand rising to $400 billion by 2020, but domestic manufacturing capacity value rising to only $100 billion.
This is a summary of key points from a detailed article about end-use market developments in India, by specialist writer Kunal Bose, based in Kolkata, to be published in the May 2015 issue of Metal Bulletin Magazine, which is available as part of the Metal Bulletin subscription. Sign up for a free trial here.