Prospects bright for welding industry

You know the Indian growth story is catching attention around the world when global companies start gunning for their own piece of the action.

India's government is doing all it can to ensure the country's growth rate stays above 7 per cent. It is taking all possible steps to achieve this, including a massive infrastructure development programme.

This programme is in turn stimulating demand across a range of sectors and industries. One of these is the welding industry, one of India's potential growth industries.

India's welding industry is a Rs11 billion (Dh926 million) business. It endured some difficulties a few years ago but things are looking up today.

The welding industry's fortunes depend on demand from sectors such as steel, aluminum, oil exploration, ship-building and others.

Take steel. India's steel industry is planning to invest about Rs1 trillion (Dh84 billion) in capacity expansion and equipment upgrades over the next five years.

Then there is the oil and gas industry, which is projected to spend about Rs 175 billion (Dh14 billion) in the next five years on new pipelines and other projects. The shipping industry's order books are packed full for the next to three years.

High demand in each of these sectors translates into good news for the welding industry.

India's welding industry can be divided into three segments — welding consumables, welding equipment and welding automation products.

The welding consumables segment represents about 75 per cent of the total welding-related market. Welding equipment accounts for about 20 per cent, while wielding automation products account for the remaining 5 per cent.

Different welding processes are used for different applications.

The main processes used in welding are the manual metal arc welding process, the submerged arc welding process, the metal inert gas/active gas welding process, the tungsten inert gas welding process and the flux corded arc welding process.

In India, the most widely used welding process is the metal arc welding process. This is because the electrical arc welding equipment and consumables required for this process are not technology-intensive and are easy to use.

This welding process accounts for about 80 per cent of total demand for welding services in India.

Automatic welding techniques are used in the country as well. These, however, are capital intensive and cannot be performed on-site in a practical fashion.

Automatic welding is used in mass production centres requiring large-scale repetitive welding where economies of scale justify their usage. This type of welding is mainly used in the white goods industry and the automobile industry.

The automatic and semi-automatic processes cater to about 20 per cent of the market.

The organised portion of the welding industry serves the automatic and semi-automatic equipment market.

It also provides higher-end electrodes as well. The unorganised sector is confined to the low end-stick and mild steel electrodes segment.

The organised segment has been gaining in size and sophistication lately. It consists mainly of about 20 large players. The increased quality and efficiency of work has been easily noticeable.

The main players in the organised sector include Esab India, Ador Welding, D&H Secheron and Modi Industries.

The unorganised players have, for their part, been able to build a strong distribution network. The unorganised players have the technical know-how to fashion products known for their quality and variety of uses. There are about 300 players in the unorganised sector.

Market last week

The markets saw some profit-taking, after posting repeated gains during the past few weeks. The markets ended at 6,700 for the week, losing about 150 points. An across-the-board correction took place as oil prices soared.

This week

This week, we may see some additional corrections. With global crude prices soaring, this phenomenon may continue. I would like to also add the crude impact will be temporary.

I still believe the Indian markets will do well in the longer term. A temporary blip, however, cannot be ruled out.

The market will be range-bound and face chances of high volatility. It should trade in the range of 6,500 to 6,900.

The writer heads the Dubai office of Karvy Stock Broking Ltd.