AIFI Raises Concerns Over Rising Steel Prices

Mobility Outlook Bureau
31 Oct 2022
11:30 AM
2 Min Read

The apex body noted that as a result of rising steel prices, production costs have also risen, which is negatively impacting the forging industry


The Association of Indian Forging Industry (AIFI), the apex body of the forging industry in the country, has announced its contentment with the festive spirit but has raised concern over the high costs of steel, aluminium, and nickel since steel price volatility has impacted the sector.

The association noted that, as a result, rising production costs negatively impact the forging industry.

Interestingly, the Indian auto industry experienced strong sentiment across segments in September 2022, with an overall YoY growth of 21.2%, AIFI stated.

It added that even on a quarterly basis, the industry rose by 18.3% YoY, closing Q2FY22 with retails of 6,052,628 vehicles, up from 5,115,112 units at the same time last year.

Sales in all categories increased significantly, with 2W, 3W, CV, PV and tractors growing by 52%, 115%, 48%, 70% and 58%, respectively. The domestic passenger vehicle industry recorded its best-ever monthly sales performance in September due to strong festive demand, which is a result of improved semiconductor supply and favourable production conditions, the apex body continued.

Additionally, the auto industry witnessed significant growth in sales last month; 3,54,702 units were sold in September 2022 compared to 1,87,144 in the same month the previous year, with an increase of 89.5%.

Leading manufacturers like Maruti Suzuki, Hyundai, and Tata Motors boosted their dispatches to dealers last month due to improved production with the easing of the chip shortage. Thus, the overall auto components and forging industry have improved their order books.

Meanwhile, the association noted that the global electric vehicle (EV) market is expanding rapidly. The Indian EV market is also continually growing, with close to 0.32 million vehicles sold in 2021, marking a 168% increase YoY.

The Indian auto industry is the fifth largest in the world and is anticipated to become the third largest by 2030. The EV push in India will create a slew of new business opportunities. As the industry is rapidly shifting towards EVs, the Government is focusing more on safety regulations that will provide more stability, quality, and efficiency, AIFI said.

Vikas Bajaj, President, AIFI, noted that the auto industry achieved the 10 lakh sales mark between July and September 2022. 'This is encouraging news for the Indian Forging Industry, as we primarily serve the Indian Automotive Industry, which accounts for 70-80% of forging production. Sales were hampered last year as a result of a global shortage of semiconductors,' he added.

The auto sector has grown this year as chip shortages have eased; however, increased commodity prices, high-interest rates, inflation, and high CNG expenses, as well as the Russia-Ukraine crisis, are cause for concern and may have an impact on the market in the coming quarters.

Furthermore, the volatility of steel prices has harmed the Indian forging industry this year. While steel prices were unavoidable due to global trends, a more prudent and balanced approach would have been preferable for the business.

“We will need to monitor how the economy performs generally, as well as how inflation and interest rates move in the future,” Bajaj opined.

Yash Jinendra Munot, Vice President, AIFI, said, “A prosperous festive season is expected, and we are optimistic. We anticipate that this year’s festive season will be the best in terms of vehicle sales.”

He continued that the electric vehicle sector remains a big concern for the forging and auto component industries since the demand for moving parts used in vehicles will decrease significantly, resulting in considerable unutilised forging capacity.

'In the coming years, we estimate that EVs will eliminate 60% of the forging and casting industries, leading to job losses and business closures. It will take at least a decade in India to entirely shift to EVs.

However, the forging industry must consider alternative options such as aluminium forging and expand into non-automotive sectors such as infrastructure, defence, healthcare and railways, where the current Government is also investing heavily. As an association, we would be delighted if the Government encouraged hybrid vehicles over electric vehicles (EV),” he added.

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