- MetalworldResearch Team

July 201924METALWORLD

In-Focus

Extrusion sector going through a rough phasebusiness in medium term.

Extrusion is a process

used to create objects of a

fixed cross-sectional profile.

A material is pushed

through a die of the desired

cross-section. The two main

advantages of this process

over other manufacturing

processes are its ability to

create very complex cross-

sections, and to work

materials that are brittle,

because the material only

encounters compressive

and sheer stresses.

It also forms parts with

an excellent surface finish.

Drawing is a similar process,

which uses the tensile

strength of the material to

pull it through the die. This

limits the amount of change

which can be performed in

one step, so it is limited to

simpler shapes, and multiple

stages are usually needed.

Drawing is the main way to

produce wire. Metal bars and

tubes are also often drawn.

Extrusion may be

continuous (theoretically

producing indefinitely long

material) or semi-

continuous (producing

many pieces). The extrusion

process can be done with

the material hot or cold.

Commonly extruded

materials include metals,

polymers, ceramics,

modeling clay, concrete and

Metal extrusion

industry in India is

currently going through a

tough phase due to the

ongoing slowdown in the

rural economy which led to

a decline in auto sales.

While the government’s

re-capitalization to the banks

announced in the Union

Budget 2019 has renewed

hopes for a recovery in small

and medium enterprises

(SMEs) and micro, small and

medium enterprises (MSMEs)

which is set to percolate to

benefit metal extrusion

industry in India, the broad

sentiment remained weak

which may hurt growth of

the metal extrusion

In-Focus

foodstuffs. Also referred to

as “hole flanging", hollow

cavities within extruded

material cannot be

produced using a simple flat

extrusion die, because there

would be no way to support

the centre barrier of the die.

Instead, the die assumes the

shape of a block with depth,

beginning first with a shape

profile that supports the

center section. The die

shape then internally

changes along its length

into the final shape, with the

suspended center pieces

supported from the back of

the die. The material flows

around the supports and

fuses together to create the

desired closed shape.

Hot extrusion is a hot

working process, which

means it is done above the

material's recrystallization

temperature to keep the

material from work

hardening and to make it

easier to push the material

through the die. Most hot

extrusions are done on

horizontal hydraulic process

that range from 230 to

11,000 tonnes.

Pressures range from 30

to 700 MPa, therefore,

lubrication is required, which

can be oil or graphite for

lower temperature

extrusions, or glass powder

for higher temperature

extrusions. The biggest

disadvantage of this

process is its cost for

machinery and its upkeep.

The extrusion process is

generally economical when

producing between several

kilograms (pounds) and

many tons, depending on

the material being extruded.

There is a crossover point

where roll forming becomes

more economical. For

instance, some steels

become more economical

to roll if production is more

than 20,000 kg.

Focus on SMEs and MSMEs

The entire SMEs and

MSMEs business units in

India have been facing

working capital crises due to

a squeeze in loan disbursal

from banks and financial

institutions. Owing to their

weak balance sheets and

poor repayment history,

most SMEs and MSMEs

depended heavily on non-

banking finance companies

(NBFCs) for working capital

raisings at of course high

interest rates. But the recent

bout of NBFC collapse has

impacted their capital

raising plants which

curtailed their production

and financial performance.

Despite the Union Finance

Minister Nirmala

Sitharaman emphasized in

the Union Budget 2019

much on SMEs and MSMEs

to improve their

performance, the metal

extrusion industry is set to

become the last

beneficiaries in the curve.

Auto sales down

Automobile industry

delivered a highly subdued

volume performance in

1QFY20 with double-digit

volume decline for majority

of the segments. Moreover,

weak demand, distraction

during central election,

negative sentiment in rural

market led to lower quarterly

retail sales. Higher monsoon

deficit in few regions of

South and West is believed

to have impacted the rural

consumption in past few

months impacting rural auto

sales in 1QFY20. Passenger

Vehicles and two wheeler

industry witnessed rough

patch due to higher

inventory at dealers’ end and

low retail off-take.

The CV segment has

been getting impacted due

to higher axle load norm

which led to additional

system capacity and

temporary halt on

construction projects during

election period. It is

expected the companies

with higher exposure to

overseas markets to report

dismal performance on the

back of slowdown in global

July 201926METALWORLD

The extrusion

process is

generally

economical

when producing

between several

kilograms

(pounds) and

many tons,

depending on

the material

being extruded.

In-Focus

auto demand. Moreover,

intense competitive

environment has resulted

into higher incentives/

discounts for 2W and

M&HCVs, putting pressure

on the companies’ margins.

Though few companies

have hiked prices by 0.5-1%

in 1QFY20, the hikes were

not commensurate to cost

inflation. The auto ancillary

companies (tyre

manufacturers) are expected

to witness turbulence due to

production cut by the OEMs

and inventory de-stocking.

However, replacement

demand would benefit their

performance to some extent

in 1QFY20.

Auto companies,

therefore, are expected to

witness a 7.5% YoY decline

in revenue. Considering

higher input cost, negative

operating leverage and

higher expenses due to

discounts/ incentives, the

margin is expected to

contract on YoY as well as

QoQ basis. Profit of auto

companies is expected to

decline by 25% YoY, while

quantum of decline would

vary from 2% to 48%. The

automobile industry is

expected to report muted

volume performance in

1HFY20E, though it would

improve in 3QFY20 with pre-

buying ahead of BS-VI

implementation.

Marginal growth is

expected for FY20 across

segments, while the industry

is expected to witness

cyclical downturn in FY21E.

Passenger vehicles segment

is likely to outperform the

industry over next 2 years due

to low penetration, reducing

product life-cycle, lower price

hike due to BS-VI transition

and faster up-gradation.

Auto industry

performance remains under

pressure led by (1) weak

retail sales due to weak

consumer sentiment,

increase in vehicle prices

due to regulatory changes

and high financing cost and

(2) inventory correction by

OEMs in June 2019. The PV

industry is likely to report

double-digit volume decline

on a YoY basis in June

2019. Moreover, two-

wheeler industry volumes

are expected to continue

treading on the declining

path on a YoY basis.

MHCV volume growth

also remained under

pressure indicating spillover

of liquidity crisis and

financing constraints in

June 2019. Passenger

Vehicle industry volumes

declined double digit YoY in

June 2019 led by (1) weak

retail demand and (2)

inventory correction by

major OEMs. Maruti’s

overall volumes declined by

14% yoy (three consecutive

months of double-digit

decline) to 124,708 units in

June 2019 led by (1) 15%

YoY decline in domestic

volumes and (2) 6% YoY

increase in exports.

Entry and compact

hatchback/sedan car

segment volumes declined

by 19% YoY in June 2019.

Ciaz volumes increased by

47% yoy, SUV volumes were

down 8% YoY and Van

segment volumes declined

by 24% YoY in June 2019. In

terms of other OEMs,

Hyundai continued its down

trend with domestic

volumes down 7% YoY in

June 2019 despite launch of

the new compact SUV

Venue in May 2019.

Toyota’s PV volumes

July 201928METALWORLD

Entry and

compact

hatchback/

sedan car

segment

volumes

declined by

19% YoY in

June 2019

declined by 19% YoY and

Tata Motors’ domestic PV

volumes declined by 27%

YoY in June 2019.

Mahindra’s auto division

reported 6% YoY volume

decline in June 2019, which

was driven by (1) 15% YoY

decline in the CV segment

and (2) 11% YoY decline in

export volumes. Weak

consumer sentiment and

demand along with the

company’s focus on

correcting the channel

inventory impacted volumes

in June 2019.

Domestic CV segment

volumes declined by 15% led

by (1) 36% yoy decline in

MHCV volumes and (2) 13%

YoY decline in LCV volumes

in June 2019. However, the

passenger vehicle segment

increased by 4% YoY led by

8% YoY increase in UVs on

the back of three product

launches (Marazzo, Alturas

G4 and XUV 300) by the

company. M&M’s overall

tractor volumes declined by

18% YoY led by (1) 19% YoY

decline in domestic volumes

and (2) 3% YoY decline in

export volumes in June

2019 due to a sluggish

demand scenario. Escorts

reported 11% YoY decline in

domestic tractor volumes in

June 2019. Tata Motors

reported 7% YoY decline in

domestic CV volumes led by

(1) 19% YoY decline in

M&HCV truck sales, (2) 10%

YoY decline in SCV cargo

and pickup trucks and (3)

3% YoY increase in I&LCV

truck sales in June 2019.

Domestic CV sales were

weak mainly due to low

freight availability and falling

freight rates.

The company also

highlighted that liquidity

crunch, higher interest rates

and difficulty in funding

from the NBFCs impacted

domestic CV sales in June

2019. Also, the tipper

segment volumes declined

by 12% YoY in June 2019.

Export volumes (CV+ PV) for

Tata Motors slumped by

48% YoY in June 2019 led by

drop in retail sales in

Bangladesh, Nepal and

Middle-East markets.

VECV’s volumes declined by

29% YoY in June 2019.

Ashok Leyland’s total

volumes declined by 19%

YoY led by (1) 25% YoY

decline in the MHCV

segment and (2) 3% YoY

decline in the LCV segment

in June 2019.

Royal Enfield’s volumes

declined by 22% YoY led by

24% YoY decline in domestic

volumes in June 2019. TVS

Motor reported 5% YoY

decline in total volumes in

June 2019. Bajaj Auto

reported flattish volumes

YoY led by (1) 4% YoY

increase in the motorcycle

segment and (2) 20% YoY

decline in the three-wheeler

segment in June 2019. Hero

is yet to report numbers.

Global aluminium extrusion

Aluminium extrusion

forms the largest share in

the overall metal extrusion

industry. The global

aluminum extruded

products market is

projected to register a

healthy CAGR of 6.5% to

reach $68.5 billion by 2025.

Aluminum extrusion is a

technique to transform

aluminum alloy into

extruded products with a

definitive cross-sectional

profile. The malleability of

aluminum alloys helps in

machining and casting them

into extruded products of

complex shapes. After the

extrusion process, various

options are available to

adjust the texture, color, and

brightness of the aluminum

products.

Custom aluminum

extruded products have

longer shelf life than other

materials, such as steel and

plastic, owing to its high

strength, lightweight, and

corrosion resistant property.

The surging demand for

aluminum extruded

products in the construction

July 201930METALWORLD

Custom

aluminum

extruded

products

have longer

shelf life

than other

materials

In-Focus

industry in the emerging

countries of Asia-Pacific is

expected to boost the global

market growth during the

forecast period.

Factors such as rapidly

growing construction and

transportation industries,

growing investments for

infrastructural development,

and increasing disposable

income are also likely to

favor the global market

growth in the coming years.

There is a rise in

consumption of aluminum

extruded products in the

construction of bridge

railings and coverings, road

signs and light poles, and

pedestrian bridges, among

others due to its ease of

fabrication, low maintenance

cost, and lightweight.

The rising demand for

aluminum extruded

products in the automotive

industry is likely to boost the

global market during the

forecast period. Advanced

systems in automobiles

such as sensors and

batteries have increased the

overall weight of the

vehicles. Environmental

issues such as global

warming due to increasing

CO2 emissions and

depletion of fossil fuel oil are

the major concerns.

Stringent automotive fuel

efficiency and emission

standards have favored the

consumption of the product

in automobiles due to its

lightweight, high strength,

and cost-effectiveness. The

growing popularity of

aluminum extruded

products in electric vehicles

(EVs) is likely to create

immense growth

opportunities for global

market players.

The growing

environmental concerns have

resulted in the adoption of

electric vehicles, is expected

to favor the global market

growth. Developments such

as fuel cell electric vehicles

(FCEVs), hybrid electric

vehicles (HEVs), and battery

electric vehicles (BEVs), are

likely to boost the demand

for the product in the

production of lightweight

battery enclosures. The

leading EV manufacturers

such as Tesla, BMW, and

Nissan are increasing using

aluminum-based battery

enclosures.

Based on product type,

the mill-finished segment

held the largest market

share of 40% in 2017 and is

estimated to register the

highest CAGR of 5.5% during

the review period. This is

largely attributed to the high

strength and cost-

effectiveness of the mill-

finished product.

It finds widespread

applications in the

automotive and

construction industries. In

addition, they exhibit

excellent performance in

high and low temperatures,

and humidity. On the basis

of alloy type, the 6000 series

aluminum alloys segment

dominated the global

market with a market share

of 42% in 2017 and was

valued at $17,010 million.

This is attributed to its high

strength, versatility, and

superior corrosion resistance.

Some of the common

alloys used are 6026, 6061,

6063, and 6082. By end-use,

the construction segment

accounted for the largest

market share of 44% in 2017

and is estimated to exhibit a

significant CAGR of 6.63% in

the following years. This is

attributed to the structural

integrity and soundproof

properties, and low cost of

the product. Aluminum

extruded products are

widely used in new

construction projects,

airports, and residential and

commercial buildings.

Aluminium extrusion in India

India's per capita

consumption of aluminium

extrusion is amongst the

lowest in the world. The B&C

industry which is the major

consumer of aluminium

July 201931METALWORLD

The growing

environmental

concerns have

resulted in

the adoption

of electric

vehicles, is

expected to

favor the

global market

growth.

In-Focus

extrusions in India (followed

by the industrial and the

transport segment) uses

aluminium extrusions in

prefabricated structures,

windows and door frames

systems, curtain walling,

roofing and exterior cladding,

space frame systems,

geodesic domes, canopies,

bridge decks, atriums,

arches, etc. The popularity

of aluminium formwork and

shutters is also on the mount

as it augments construction

speed. There exists today an

assortment of aluminium

extrusion profiles in the market

which are fabricated and are

customized according to the

specific requirements.

The huge demand of

extruded products in the

construction sectors has

also been amplified with the

number of metros being

launched in different cities

and the recent emphasis of

the Government on low cost

housing projects. Aluminium

extrusions score due to their

energy efficiency, non-

corrosive nature, supreme

finishes, functionality and

space utility. The metal's

lightweight and low density

(1/3rd of copper or steel)

whilst being one of the

strongest construction

materials, eliminates the

need of addition of any extra

weight to the building.

Buildings in highly seismic

zones also benefit from this

reduced weight of aluminium

extrusions (since seismic

forces are proportional to

the structure weight).

The common use of

aluminium extrusions in the

design of impact and blast

resistant doors and

windows has also been

noticed. Other factors

include aluminum’s ready

availability, its versatility in

getting extruded in various

shapes and its durability

which is much longer as

compared to other materials

like steel. The feasibility of

more complex shapes, wider

sections and tighter

tolerances are making the

extrusions more popular

and a noted shift has been

found in the attitude of the

buyers who are focusing

towards 'solutions' rather

than just picking up 'off-the-

shelf profiles'.

Aluminium extrusions

are also receptive to high-

performance architectural

coatings which help in

maintenance-free

performance.

With the B&C sector

becoming more quality

conscious, one today

notices architects and

builders interacting with the

extruders directly for supply

of profiles. Keeping this in

mind, Hindalco Industries

Limited - the world's largest

aluminium rolling company,

one of the biggest producers

of primary aluminium in Asia

and a lead producer of

aluminium conducts

'Architects and Builders'

meets to edify and inform

architects and builders

about aluminium as a B&C

material. In an environment

where green buildings are

talk of the day, aluminium

extrusions are present for a

number of green solutions in

buildings. This include those

for Double skin curtain

walling, Photo Voltaic

integrated systems, thermal

breaks, sun light louvers and

unitized solutions.

However, there are also a

number of disadvantages of

the Indian aluminium

extrusion industry amongst

which cost remains a major

issue. High operational

costs (rendering the profits

on the lower side), higher

administrative expenses per

unit of manufacturing and

sale of finished products

(due to the sufficient staff

that needs to be employed)

are a hindrance. Many agree

that though quality

extrusions might cost more,

but they prove to be

advantageous in the longer

run since the life costs

become reasonable.

July 201932METALWORLD

However, there

are also a

number of

disadvantages

of the Indian

aluminium

extrusion

industry

amongst which

cost remains

a major issue.

In-Focus