The forging industry has sought the intervention of the Prime Minister’s Office to save them from another crisis arising from the steep rise in steel prices which has hit the already pandemic-ravaged sector hard. The forging industry comprises 85 per cent of MSMEs and directly employs over 3 lakh, with an equal number employed indirectly, making it the second largest in the world after China.
Steel prices have jumped by 25-30 per cent in the past six months, putting the forging industry at serious risk, the Association of Indian Forging Industry said on Monday. In the last year alone, steel prices moved up by Rs 16,950 a tonne, and the industry has now announced a further Rs 6,000 increase from July, taking the total price increase to Rs 22,450 per tonne, it added.
As against this, in the US the price rose by only USD 175/tonne or Rs 12,800, and in Europe it was 150 euros or Rs 12,900. The association said it has approached the Prime Minister’s Office (PMO) as its representation to the ministries of MSMEs, heavy industries, steel, and commerce and industry did not elicit any tangible results. While the industry was slowly recovering from the second wave of the pandemic, the rapid increase in steel prices has hammered the sector badly, it said, as it sought the Prime Minister’s intervention to “save the forging and auto components industries from a major crisis,” the association’s president Vikas Bajaj wrote in the letter to the PMO.
The forging industry has been gradually returning to normalcy, thanks to increased domestic demand from the auto sector as well as a favourable export opportunity. Due to the Chinese factor, a large number of new inquiries are coming from both North America and Europe. But the steep increase in steel price has put a break on that, he added. Unless the government intervenes to stop this disproportionate and unreasonable steel price hike, the entire automobile, auto components, and forging industry will become uncompetitive, he warned.
As of March 2020, the forging industry had a turnover of Rs 40,000 crore, of which exports contributed Rs 14,000 crore. For the fiscal 2022, forging production is expected to grow more than 10 per cent and is likely to maintain that growth rate till FY204. According to Yash Jinendra Munot, the association’s vice-president, steel is the primary raw material used in the forging industry, accounting for 60-65 per cent of the ex-factory value of forgings.
With the steep rise in steel prices, this is expected to rise to around 75 per cent. With such an increase in input cost, the sector’s survival is a challenge now, he added. Alleging a steel cartel at play, the association also requested the government to consider regulating steel prices.