The Potential of Sri Lanka's Light Engineering Sector

The light engineering industry is one of the largest segments contributing to the overall industrial growth of a nation. It is an intermediate unit whose demand depends on a variety of end-user industries such as power, mining, consumer goods, automotive, and the general manufacturing sector. In other words, the products covered under this industry are largely used as inputs to the capital goods / heavy engineering industries and services sector. Being highly labour-intensive, the light engineering sector generates ample employment opportunities in the economy, especially in the areas where there is an abundant supply of skilled and semi-skilled labour. 

Sri Lankan light engineering product manufacturers are engaged in the manufacture of less capital-intensive products as opposed to the manufacture of heavy engineering products and serve the needs of both end consumers or other manufacturing and agricultural businesses.

In Sri Lanka, the light engineering industry is recognised as a thrust sector with significant export earnings potential and the ability to support some of the major export industries in the country such as Ceylon tea, coconut, rubber, food and beverage, telecommunication, boat building, and transport industries. Thus, fundamentally, the importance of the light engineering industry in Sri Lanka forks as a supporting industry for some agricultural and manufacturing industries and as an industry for manufacturing consumer durables. In exploring the potential of Sri Lanka's light engineering sector, both ends it serves must be taken into account. 

The presence of a well-developed and sound 'light engineering' sector is of paramount importance to the Sri Lanka economy and is the basis of almost all products and business activities in the country. The major suppliers to this industry are the companies supplying them with raw materials like steel, aluminium, copper etc.

The Current Status of Sri Lanka's Light Engineering Sector

The Light Engineering Industry in Sri Lanka consists of over 500 manufacturing units, including small & medium size units and export-oriented ventures. The industry provides direct and indirect employment for over 100,000 people and supplies intermediate products to agriculture, manufacturing, construction and automobile industries. Sri Lanka produces over 2000 metric tons of construction steel, 50 metric tons of brass castings and 100 metric tons of aluminium castings and extrusions monthly. Most Light Engineering manufacturers use metal scraps as the major raw material for their value-added products. Metal scrap price in Sri Lanka is lower than in the other competitive countries. It is one major advantage for the businesses in this industry.

Sri Lanka's export earnings from this sector had amounted to US$ 213 million in 2017 and then it had risen to US$306 million in 2019. The sector exports such products as agriculture and construction machinery, different types of castings, copper products, automobile parts, aluminium extrusions, bicycles, and different types of trailers. These are mainly exported to China, India, Germany, USA, Maldives, Singapore, Japan, South Korea, Italy, Netherland, and France. Sri Lanka can cater to the small order requirements in the niche markets as well. 

The Global Market for Light Engineering Products

Talking about the global scenario, it must be noted that the light engineering sector growth depends on the industrial and manufacturing growth and with enhanced export opportunities. Emerging trends like outsourcing of engineering services have also provided opportunities for growth with engineering and design services (such as new product designing, product improvement, maintenance, designing manufacturing systems) getting increasingly outsourced to Asian countries. 

The global market for metal light engineering is fuelled by continued investments in electric furnaces and metal processing, the growing aluminium consumption, and recovery in non-residential investments. The global light engineering market was valued at US$1635 billion in 2015 and is projected to expand at a CAGR of 3.0% to reach US$2138 billion by 2024.

Europe was identified as the key metal light engineering market, holding approximately 1/4 of the global market share in 2020. The growing number of metal light engineering units in Europe is mainly attributed to the growing demand for metal fabricated products from the automotive and manufacturing sectors. In Europe, the industrial scenario is mainly judged by the overall growth in the manufacturing and automotive industries. Furthermore, favourable government regulations have strengthened the European metal light engineering market. Germany held the leading market share in the European region and is expected to witness rapid growth during the forecast period, expanding at a CAGR of 4.3%.

The Asia Pacific has been one of the key regions holding a comparatively larger share in the global metal light engineering market in 2015 and is expected to dominate the market throughout the forecast period. China holds the majority of the market share in the Asia Pacific as well as globally and the growth is projected to expand at a CAGR of 2.4% from 2016 to 2024. The establishment of new metal light engineering plants in Japan, China, India, Singapore, and South Korea is mainly driven by the rise in construction activities, the growing number of iron and steel manufacturing units, and an overall rise in the number of manufacturing plants. Furthermore, the growth of the industrial sector across the Asia Pacific has positively influenced the expansion of the metal light engineering market in the past few years.

With all the global developments already taking place and those to come in the foreseeable future, it's not hard to see that there's ample potential for Sri Lanka to enlarge their market share and fuel the export earnings from this sector. With a holistic strategy and solid support from multiple stakeholders, it's all within Sri Lanka's reach. 

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