Engineering exports recorded around 3.3% cumulative growth year-on-year during the first five months of fiscal 2024-25

Excluding the export of iron and steel, engineering exports recorded a higher growth both on a monthly as well as cumulative basis as shown in the table above. Exports of Iron and Steel however secured 29.4 percent year-on-year growth in October 2024 but contimued to decline on a cumulative basis and dropped by 20.91 percent year-on-year during April-October 2024-25.

Source : DGCI&S, Govt. of India

The following table depicts region wise India’s engineering exports for April-October 2024 as compared to April-October 2023.

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Reasons for Decline (As per April-Septepber 2024-25):

• Iron and Steel and Products of Iron and Steel: - Insights: 

a)During April-October 2024-25, India’s exports of Iron and Steel deteriorated by 21% vis-à-vis same period last fiscal, while Products of Iron and Steel witnessed growth to the extent of 1% during the same period, after continuous decline for many months.

b)Indian steel HRC exports remained sluggish this week as global market sentiments weakened further. Indian offers to the Middle East (ME) remained largely stable amid competitive quotes from China. Furthermore, a recent deal between China and the Middle East further pressured Indian exports. In contrast, European offers continue to be affected by weak regional demand.

c)India’s HRC offer to Middle East: Indian HRC export prices to the Middle East (ME) continued to remain stable for the week at $560/t CFR, as per sources. Chinese HRC export prices to the Middle East fell by $10/t w-o-w to $520-525/t CFR UAE against $530-535/t CFR UAE last week amid active trade.

d)India’s HRC offer to EU: India's HRC export offers to Europe (S275, 3mm) continued to remain range-bounded at $590-595/t CFR Antwerp ($540-545/t FOB, east coast India). Indian steel mills' export offers failed to gain traction in the European market due to high prices relative to domestic rates and EU trade restrictions. The unfavourable US dollar-euro exchange rate further increased import costs. In the EU, domestic HRC prices remained flat amid sluggish trading, with market participants uncertain about the market's direction for Q1CY'25.

e)Overall outlook: Chinese steelmakers continue to be highly competitive, offering lower prices and actively seeking export markets. This poses a significant challenge for Indian exporters. The global economic outlook remains sluggish, with geopolitical tensions contributing to concerns about overall steel demand and potential impacts on Indian exports.

• Non- Ferrous Sector (Copper, Aluminium, Zinc) 

• Copper: (decline of 6% in April-October 2024) 

a)Copper exports have increased in October 2024 by 26%. If this trend continues, we will see a revival in copper exports for the fiscal 2024-25

b)The 6% decline in cumulative terms can be attributed to the declineing copper exports in the previous months

c)The decline was a result of

   
• global price volatility: In September global copper prices showed volatility –trended downwards in the beginning of September 2024 before gaining on growing anticipation of a rate cut by the US Federal Reserve which was came through on 18 September
   
• Increase in domestic demand especially the EV sector: The Ministry of Mines projects that the demand for copper in India, particularly from the EV sector, will increase by 1.7 million tonnes by 2027. The per capita copper consumption in India is also expected to rise from the current level of 0.6 kg to 1 kg in the coming years.
   
• Closure of Vedanta's Sterlite copper plant

• Aluminium (decline of 7% in April-October 2024)

a) Aluminium exports have increased in October 2024 by 17%. If this trend continues, we will see a revival in Aluminium exports for the fiscal 2024-25

The 7% decline in cumulative terms can be attributed to the declineing Aluminium exports in the previous months

The decline was a result of

   
• Restrictive trade policies and geopolitical tensions including Section 232 and U.S. Tariffs, U.S. Anti-Dumping Duties on Aluminium Extrusion Products
   

• The Indian aluminium exports also face discrimination in market access in ASEAN countries and even our neighbouring markets: In the ASEAN region, countries like Malaysia have imposed high Most Favoured Nation (MFN) duties ranging from 25% to 30% on tariff lines between 7604 to 7608, severely limiting exports from India’s downstream aluminium industry, which predominantly comprises MSMEs. Similarly, Indonesia has placed downstream aluminium products under the Sensitive Track, further restricting market access.

  India’s aluminium exports also face discriminatory practices in neighbouring countries such as Bangladesh. In April 2023, Bangladesh reclassified aluminium billets under HS code 76012090 to 76012000, removing them from the South Asian Free Trade Area (SAFTA) agreement and imposing a 5% Basic Customs Duty (BCD) on imports from India. This change has increased the cost of exporting aluminium billets to Bangladesh, affecting trade volumes.

   
• Fluctuation in global aluminium prices
   
• Rising domestic demand

• Zinc(decline of 5% in April-October 2024)

Zinc exports have increased in October 2024 by 31%. If this trend continues, we will see a revival in zinc exports for the fiscal 2024-25. The culuative decline can be attributed mainly to the rising demand for Zinc in the domestic market.

Source : DGCI&S

The table below indicates the exports from top Indian states. It is evident from the table that almost 93.7 % of India’s exports is contributed by the listed 12 states. Within this almost 56.1 percent of exports is done by Maharashtra, Tamil Nadu and Gujarat together.

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Engineering forms a considerable part of the broader manufacturing sector and the share of engineering production in overall manufacturing output is quite significant. As exports generally come from what is produced within a country, some correlation between manufacturing production growth and engineering export growth should exist. We briefly look at the trend in manufacturing growth as also engineering export growth to see if they move in tandem. It may be mentioned that manufacturing has 77.63% weightage in India’s industrial production.

Engineering export growth and manufacturing output growth moved in the same direction in as many as nine out of twelve months in each of the fiscal years 2019-20 and 2020-21. During fiscal 2021-22, engineering export growth and manufacturing growth moved in the same direction in seven out of twelve months while in each of fiscal 2022-23 and 2023-24, as many as 10 out of 12 months saw engineering exports and manufacturing output moved in the same direction.

The first two month of fiscal 2024-25 also saw manufacturing output growth and engineering exports growth moving in the same direction. April 2024 saw engineering exports declined from a growth in Mar 2024 and manufacturing output growth decelerated. The month of May 2024 witnessed just the opposite. Engineering exports bounced back to growth path and manufacturing output growth accelerated. Then June, July and August 2024 however saw both moved in the opposite direction. June and August 2024 saw higher engineering export growth but lower manufacturing growth in comparison to the previous month while July 2024 just witnessed the reverse. September 2024 again saw both moving in the same direction by securing higher growth.

The link between these two may not be established on a monthly basis, but a positive correlation may be seen if medium to long term trend is considered.