Hyderabad, Aug 12 (KNN) The small and medium enterprises (SMEs) having industrial forging units are likely to witness a 50 per cent decline in production in FY23, said Association of Indian Forging Industry (AIFI).

The drop is indicative of the tough time endured by the forging companies and especially SMEs in the first half of the year due to increased input costs, particularly steel, aluminium, and nickel prices.

The Forging sector, combined with a decrease in automotive demand, is expected to reduce capacity utilization in FY23, said the association.

India's overall automotive sales has seen a double-digit fall in the last two fiscal years due to Covid-19 outbreak and various factors, including a shortage of semiconductor chips, rising input costs, rising commodity prices, and rising fuel costs (FY20 and FY21).

Thus, the overall auto- components and forging industry have not seen an improvement in their order books, said AIFI.

Underling the challenging circumstances for the industry, Yash Jinendra Munot, Vice President, AIFI said, “The forging sector faces new challenges on a regular basis and volatility in steel prices has damaged the Indian forging industry.”

“The forging industry's core requirement is steel and the present price increase has disrupted the supply chain. Furthermore, high raw material prices remain a challenge, and high fuel prices continue to influence customers and buying decisions,” he added. 

Explaining the impact of electric vehicle sector on the forging industry, Vikas Bajaj, President, AIFI said, “Since the demand for moveable parts used in vehicles will decrease, resulting in considerable unutilized forging capacity. Internal combustion engines in automobiles contain around 2,000 moving parts, whereas electric vehicles have only 20.”

We anticipate that EVs will shut 60 per cent of the forging and casting industries in the next few years, resulting in employment and unit closures, said Bajaj.

The forging industry in India comprises 85 per cent of the MSME sector. Over 3 lakh people are employed directly in the industry, with an equal number employed indirectly. (KNN Bureau)