Mining, construction industry to see 12-15% decline this fiscal: ICRA
Mumbai: Owing to slow pace of infrastructural investments and various regulatory hurdles, the mining and construction equipment industry is expected to witness around 12-15 percent decline in volumes this fiscal, a recent survey said.
According to rating agency ICRA, the MCE industry will witness a volume fall of 12-15 percent to around 60,000-63,000 units in FY13.
"ICRA expects subdued near term outlook for the MCE industry with demand for equipment expected to remain sluggish given the slow pace of infrastructural investments, weak business confidence and continued regulatory issues surrounding mining activities," the agency said in a statement.
Deferment in private projects and slow pace of infrastructural investments were among the key reasons hurting construction equipment volumes, while curb on mining in several geographies has impacted demand for mining equipment, ICRA said in its report.
"The current fiscal witnessed deferment or shelving of large number of projects from government and private sector alike mainly due to various reasons including payment delays by government agencies, impacting demand for construction equipment," it said.
However, according to ICRA, construction activity in the private sector may revive during the latter half of FY14, supported by a relatively benign policy environment.
Also, the prevailing large demand-supply gap in the domestic power sector and the need for basic infrastructure is expected to support requirement for mining and consequently mining equipment over the longer term.
On the construction equipment front, key demand drivers in India are investments in transportation, infrastructure like development of roads, airports, ports and railways), energy including thermal and hydroelectric power plants, rural development, telecommunications, water and sanitation, and capital investments by the manufacturing sector, it said.
"Even when construction or mining activities pick-up, the impact is likely to be felt with a lag due to the current high levels of idle inventory in the market," ICRA observed.
It said that medium term growth will be pivotal on successful implementation of the 12th Five Year Plan, which underlines the demand for quality infrastructure.
While long term demand drivers, primarily infrastructure needs for the economy, remain intact, volume growth in the near term is expected to remain subdued with no visible signs of an early demand revival, ICRA said.
"Further, entry of new players, dumping from Chinese manufacturers and capacity creation in an already competitive industry is likely to hurt market share for incumbent OEMs," ICRA said in the report.