Indian aluminium firms saw sales to domestic companies fall off in the previous quarter despite production growth and strong demand, as experts say a rising tide of aluminium from the People’s Republic of China is to blame for stunting sales growth.
Per numbers from the July through September quarter, Hindalco Industries, Vedanta Ltd, and National Aluminium Company (Nalco) saw overall domestic sales improve by a scant 3.56 percent. During the same quarter, demand for aluminium jumped by 16 percent on the year, totaling 847 thousand metric tons. Consumption of aluminium also rose in the quarter, up 14 percent on the year to 1.6 million metric tons.
According to experts, the intensifying trade war between the United States and China is largely to blame, as it has flooded the market with low-cost aluminium, much of which found its way to India’s shores. In addition, the quarter witnessed a jump in fake semis from China and ASEAN (Association of South East Asian Nations) countries, rising by 13 times in the quarter to a total of 66 thousand metric tons.
Exacerbating the flood of low-cost aluminium was a bump in imported scrap aluminium, rising 19 percent on the year to 644 thousand tons. Also weighing down margins was the continually-rising cost of aluminium production, hampered by rising cost and diminishing availability of coal for fueling the aluminium sector’s legion of captive power plants. At present, the cost of production now exceeds US$2,000 per ton for all Indian producers, which is beyond the point at which non-integrated production can show a profit.
“The (aluminium) business is facing headwinds on account of an oversupplied domestic market due to continued surge in imports and rising input costs, particularly that of coal and furnace oil,” lamented Satish Pai, Hindalco’s managing director on a recent earnings call.
Aside from increases in production costs, Pai estimates that tepid demand growth in China will be a significant hurdle for the Indian aluminum industry to clear. Demand growth in the Middle Kingdom rose by 5 percent for the year through September, off by 4 percent from last year’s initial nine months.