Indian Aluminium Producers Struggle Through Fall in Domestic Demand And Rise In Imports

Indian Aluminium Producers Struggle Through Fall in Domestic Demand And Rise In Imports

Despite an aluminium demand growth in India of 7 percent in the April through June quarter, a tepid growth in consumption by major industries facing liquidity challenges held aluminium producers back in the quarter.

According to reports in domestic financial media, aluminium sales by Indian firms were off by 10.8 percent in the quarter, losing ground to cheaper imported aluminium.

“The share of imports to domestic aluminium consumption has risen to 60 per cent at the end of June,” said an industry source to domestic media. “Overall imports witnessed spike of eight per cent while scrap imports rose eight per cent in the June quarter. The unabated rise in imports is worrisome for the primary aluminium producers.”

In the prior fiscal year India saw imported aluminium rise to 2.3 million metric tons, causing a foreign exchange outgo of about one percent of imports by value, or US$5.5 billion.

Additionally, worldwide aluminium prices have suffered as well, falling by 21 percent on the year over the prior quarter to an average of US$1,793 per metric ton. Prices continued to dive as lately as this week, with cash buyers seeing offers of US$1,762 per metric ton on Monday.

The worsening trade war between the United States and the People’s Republic of China has taken a toll on the overall commodities market in recent months, while a drop in worldwide industrial and economic activities have blunted demand growth. The market’s deficit is expected to fall in a range between 1.2 million and 1.5 million metric tons for the balance of the year, a stimulus from Beijing notwithstanding. However, LME prices are not expected to rebound due to negative market sentiments.

A bright spot among the gloom may come from the flat-rolled products (FRP) segment thanks to a surge in demand for aluminium beverage cans. Demand for FRP is growing at 4 percent per quarter as of the current quarter, with an expected compound annual growth rate of 7 percent between FY2018 and FY2022.