PLI Scheme, Automobile, Export Duty: The ferrites industry in 2022 and the way ahead

561
Vikas Puri, Business Head, Cosmo Ferrites Limited

Ferrites are crucial in numerous industries, such as automotive, solar, electric vehicle, and white goods. According to a report published in Future Market Insights the global ferrite market is expected to record a steady CAGR of 5.2% from 2022-2032. Rising industrialization and urbanisation in Asia and the Pacific led to the region’s 40% share of the ferrite market, followed by North America and Europe. Despite alower saturation flux density than other soft magnetic materials, the ferrite core has excellent high-frequency magnetic properties and good electrical resistance. In India, the expansion of ferrite magnet applications in the automotive sector is the main driver of market growth. For instance, electronics for passenger safety in automotive and aviation, braking and locking systems, windscreen wipers, and seat belt indications. In addition, BLDC motors for electric fans, vacuum cleaners, and washing machines, have seen an increase in demand from the consumer electronics industry, which has sped up the use of ferrite magnets.

To integrate India into global supply chains the government of India introduced the PLI Scheme on white goods in 2021. This initiative has helped the country to create a component ecosystem for ACs and LED lights in India.It is hoped that the scheme will help to increase the use of LED lights in the country and reduce the use of traditional lighting such as incandescent bulbs and CFLs.

To boost the component ecosystem for refrigerators, washing machines, LED televisions, and small appliances, the Consumer Electronics and Appliances Manufacturers Association (CEAMA) has urged the government to prolong the Production-Linked Incentive (PLI) scheme. This will help India become a major player in the consumer electronics and appliances industry, which is expected to double its value in the next three years.Sales of cooling products reached a record high in the current year. There is a good chance that the industry will maintain this growth pace in the upcoming years given the low penetration levels in the majority of product categories when compared to levels on a global scale. This will in turn increase the demand for ferrite components in the coming years.

Ferrite rings have a lower impedance, which helps them increase the efficiency & electrical performance of various applications, which is an important component in EV. There has been a lot of focus on the Electric Vehicles sector in India. The government has also implemented a scheme titled ‘Faster Adoption and Manufacturing of Electric Vehicles in India Phase II’ (FAME India Phase II) to promote the adoption of electric/hybrid vehicles in the country. The sales of electric vehicles in India witnessed a surge in the last two years. While 48K + EVs were sold in 2020-21, the figures increased to 2.3 Lakh+ in 2021-22 and 4.4 Lakh+ in 2022-23.The primary drivers of growth in the EV segment in 2023 will be changes in policy, production of batteries at a reasonable price, and expansion of the infrastructure. The industry is already showing signs of a tailwind. The adoption of EVs is being influenced by cost and sustainability in a price-sensitive nation like India, in addition to environmental considerations. Their rising popularity is also attributed to lower operating and maintenance expenses compared to conventional petrol-powered automobiles. All these factors leading to the increasing adoption of EVs will push the demand for ferrites components like toroidal cores (rings) in turn accelerating the growth of the ferrites industry.

In addition, the government has cut the export duty on steel production & iron ore to nil with effect from Nov 19, 2022. The reason behind the cut in export duty is that domestic consumption is muted; steel & iron players have been losing overseas customers due to taxes that were imposed on exports due to rising inflation. A CMIE report states that there has been a decline in the Y-o-Y change in exports of Iron & steel in India and overall export has reduced to -57% in July 2022. Iron export was 45% and domestic consumption (India) stood at 55%. Prices of iron ore, after hitting a peak in May-June 2021 followed a declining trend from July 2021 till December 2021. However, prices of iron ore have again been witnessing an increasing trend since January 2022.

Q2 of FY23 had affected the industry due to the European situation, supply chain, and pricing corrections and it is likely to prolong even in Q3. Going forward, the industry can expect a rising demand for ferrite core transformers for their ability to function at peak efficiency with the least amount of losses. The industry can expect an improvement from Q4 given all the recent industry developments with the new set of customers as well as corrections in the supply chain.