The recently announced Union Budget 2021 has brought much-needed relief to sectors such as engineering, auto components, brass-parts, and petrochemicals. The relief in terms of duty cuts on certain items and components has come when these industries are facing a surge in raw material prices. In conversation with Mr. Ananya Ranka, Managing Director, Radian Technomac LLP, we attempt to identify the key trends in Indian Brass Industry, COVID impact and what will future hold for the industry.
How has been the COVID-19 pandemic to impact non-ferrous metals industry in India?
With the COVID-19 pandemic causing disruptions in the country, demand for non-ferrous metals has been severely impacted and in the current calendar year, the consumption is likely to contract 3-4% for copper and zinc and up to 8% for aluminum, according to a report. The COVID-19 pandemic has not only impacted metal consumption, but it has also disrupted mining activities, which would restrict availability of the metals in the physical market going forward.
How has been the demand for such products from the major end user segments?
Construction and transportation sectors are major demand drivers of the three non-ferrous metals and these sectors are strongly correlated with the health of the underlying economies and with the outlook of the global and Indian economy turning adverse because of the pandemic, demand outlook of the base metals in turn is negative.
Where is the largest manufacturing cluster of Brass parts industry in India and how has been the growth in the cluster?
With approximately 5,000 units, Jamnagar is the largest brass parts manufacturing cluster in Asia and has annual turnover totaling to around Rs 2,000 crore. The industry imports scrap from countries like the US, Europe, Gulf region etc., melts it into brass and manufactures brass billets, bars and brass parts. The industry is known to manufacture hinges for spectacle frames to aircraft parts and employs about 1.5 lakh people directly and an equal number indirectly. The Jamnagar cluster has 95% share in domestic market of brass parts and also exports to Europe, US, Gulf region and Africa. But the lockdown has disrupted the business wheel. Brass being a high-value metal, the industry requires liquidity. But due to lockdown, Delhi, Mumbai, Chennai and Kolkata, the biggest markets for our products shut down or have become slow.
How has been the export market for the brass industry today? Has anything changes drastically due to Covid pandemic?
China is the only market which is active these days. We can’t afford to pay demurrage nor do we have storage capacity beyond a limit. Therefore, we have to take delivery of scrap, manufacture products out of them offload it into the market to minimize losses. But, presently, Bengaluru and Ambala are the only brass parts markets in India which are open. That effectively leaves China, which imports brass billets, as the only business avenue available. Therefore, though manufacturing brass rods is our main business, we are manufacturing brass billets these days and exporting them to China. That country is the only overseas market where there is some demand, maybe because of quota system in importing scraps there or because markets are reopening after Covid-19 outbreak.
How has been the scenario for import of raw materials in the industry today?
The factories manufacturing brass parts fall in the category of micro, small and medium enterprises (MSMEs) and depend on import of scrap to meet 90% of their raw-material requirements. We hope the central government to direct banks to give us additional loans as announced in economic package, else our industry will be facing an existential threat. China is the largest importer of scrap but its brass and brass parts are perceived to be of inferior quality, compared to their Indian rivals.
How do you see the future of the Industry?
The reduction on customs duty on imports of copper from 5% to 2.5% has given a new lifeline to the manufacturers of brass parts – who form a huge clusters of mainly comprising small and medium enterprises (SMEs) in Jamnagar. Brass is an alloy that is a blend of 40% zinc and 60% copper and with duty reduction, copper will come cheaper, thus reducing the cost of production of brass parts.
