In-Focus

Indian Aluminium Rising international trade at slower pace

Metalworld Research Team

ontinuous rise in import

of aluminium despite
being self-sufficient, has
narrowed gap with exports which
threatened India's competitive
edge in base metals with its
endowed mineral resources. With
imported raw materials,
however, countries like Saudi
Arabia is strongly challenging
India's dominance in global
markets for aluminium exports.
Also, cheap imports have pushed
margins of India's three large
aluminium producers including
Hindalco Industries, Vedanta
and Nalco under tremendous
pressure.

Falling production
India's total production of aluminium,
according to reports by the Ministry of
Mines, stood at 1.52 million tonnes for the
financial year 2013-14 compared to 1.58
million tonnes in the previous year. After a
marginal 3.72 per cent growth in 2013-14,
aluminium production stood at 1202891
tonnes in the period between April
December 2014 as compared to 1136460
tonnes in the corresponding period last
year. Nalco continued to cut in aluminium
production to report at 237913 tonnes in
the first nine months of the current
financial year compared to 244006 tonnes
in the same period last year. Balco also
posted a steep decline in its output at
243422 tonnes between April December
2014 as against 189971 tonnes in the same
period last year. Sesa Sterlite, meanwhile,
reported a stable aluminium production at
407244 tonnes versus 407903 tonnes.
Interestingly, aluminium prices hit
their lowest in last two months of 2014,

Aluminium production (tonnes)

32 February 2015

after poor industrial data from China, the

world's biggest metals consumer, and due
to further fail in oil prices. Growth in
China's manufacturing sector slowed to a
18 month low in December, 2014.
Uncertainties have also grown in
European market due to political
uncertainty in Greece. This has helped
boost the US dollar, which has been near a
two year high in comparison to Euro,
making dollar priced metals costlier for
European and other non U.S. investors.
Concerns also grew that economic
weakness in other parts of the world could
soon hit the United States as well, which
has so far performed well. It is also
anticipated that US Federal Reserve will
raise interest rates in the first half of
January, 2015 despite the economic
weakness abroad. This could push up the
dollar further, and a stronger dollar thus
will make metals prices in the US
currency more expensive to buyers using
other currencies.

In-Focus
Rising import and anti-dumping duty
Despite being self-sufficient, India has
witnessed a sharp increase in import of
aluminium in the last few years. The
product is imported from a number of
countries, and primarily from Oman,
China, South Korea, Iran and United Arab
Emirates at a competitive price. Data
compiled by the Directorate General of
Commercial Intelligence and Statistics
(DGCIS) showed India's import of
aluminium and its products at 208496
tonnes in 2013-14, around 34 rise from
154449 tonnes in the previous year. A
Press Information Bureau reported India's
aluminium import at 97595.64 tonnes in
2011-12 versus 105784.37 tonnes in the
previous year. The product is a basic form
of cast aluminium and is made by the
process of solidifying the liquid hot metal
by pouring into a mould. The aim is to
make the metal easy for handling and
transportation.
Import of aluminium and its products
is not new to India. According to analysts,
India imported 141498.05 tonnes of
aluminium and its products in 2009-10.
Users including automotive
manufacturers and others have been
importing aluminium of specific grade for
specialized applications.
Local manufacturers, however,
registered complaints in March last year
with the Ministry of Commerce for
levying anti-dumping duty on aluminium
imports to safeguard interest of local
producers including Hindalco Industries,
Vedanta and Nalco that contributes nearly
71 per cent of India's metal output.
The commerce ministry then started
investigations which, in November 2014,
rejected industry's claim.
Hindalco Industries, Sesa Sterlite and
Bharat Aluminium Company (Balco) had
urged the government to impose safeguard
duty on imports of an aluminium product
for four years to protect domestic
producers. Safeguard duty is a WTOcompatible temporary measure that is
brought in for a certain time-frame to avert
any damage to a country's domestic
industry from cheap imports. Acting on
the complaint, the Directorate General of
Safeguards (DGS) has initiated an
investigation into imports of 'non-alloyed
ingots of unwrought aluminium' used in
the automobile and machinery sector.
These companies claimed that the

increased imports of the product have

caused and are threatening to cause
serious injury to the domestic producers.
Production of the domestic industry has
slightly declined in 2013-14 (annualised)
to 551,086 MT as against the base year
2010-11 when it was 552,864 MT. The
domestic industry suffered loss in sales,
market share, caused by increased
imports. Aluminum ingot exports to India
from the UAE will not face any safeguard
duty or compensation fees following the
rejection of dumping charges, the UAE
Ministry of Economy has announced late
last year.

Growing exports
Consecutive years of below five per
cent economic growth and 0.7 per cent
contraction of the manufacturing sector
last year ensured a 6.2 per cent fall in the
country's primary aluminium use to 1.58
million tonnes (mt) during 2013-14. Even
while India is to grow at 5.5 per cent in
FY15, aluminium will likely again
experience a fall in growth. The
contraction came at a time when Vedanta
and Hindalco are raising production by a
significant amount. Government-owned
National Aluminium Company (Nalco),
exercising production discipline for the
sake of profit improvement, is now
engaged in reviewing whether more
capacity use at this juncture will prove
beneficial. A demand fall for two years in a
row has led the Indian aluminium sector to
sell the rising surplus abroad. Primary
producers' exports climbed 142,322
tonnes to 487,081 tonnes in 2013-14.
Exports had reached 523,802 tonnes till
mid-December 2014.
Bauxite deposits
India has large resources of high grade
bauxite deposits of the order of 3037
million tonnes (MT). The recoverable

34 February 2015

reserves are placed at 2525 MT. The

proved and probable reserves are 1218
MT, placing the country 5th in rank in the
world, next only to Australia, Guinea,
Brazil and Jamaica. Even at an anticipated
consumption of 7 million tonne per year
(tpa) of bauxite, these reserves are
expected to last for over 350 years. Given
the natural resource endowment, growing
demand for aluminium and its alloys,
economic opportunities and scope for
exports, India can produce alumina at
internationally competitive prices.
Aluminium metal can also be produced
competitively with the latest technology
coupled with cheaper energy
arrangements in India, or by toll smelting
Alumina in low power cost aluminium
smelters abroad. The greatest scope for
value addition and employment lies in the
development of down-stream aluminium
end-products like extrusions, rolled
products, fabrication and finished items.
India can benefit by this value addition
given the low energy requirements and
labour intensity of down-stream
industries. Aluminium has significant
industrial and economic importance for
India, as this is the one metal for which the
country has abundant raw material. While
bauxite reserves account for 7.5% of the
world's total deposits, aluminium capacity
is only 3% indicating the scope and need
for new capacities to meet growing
internal demand and for sizable exports on
a long term basis. Demand for aluminium
is expected to grow rapidly with
increasing use in the construction, power
transmission, transport and packaging
sectors. It may be noted that due to the
poor natural resource endowment of other
non-ferrous metals like copper, lead, zinc,
tin, etc., where the country is heavily
dependent on imports, aluminium and
value added exports could help in the
overall export-import balance of nonferrous metals. Alumina is produced from
bauxite ore. About 1 tonne of alumina is
produced from 3 tonnes of bauxite and
about 1 tonne aluminium is produced from
2 tonne of Alumina.
Aluminium recycling
Supply of aluminum is in excess and
any deficit can be imported at low rates of
duty. Currently, the demand is stable while
supply is in excess. Demand for
aluminium is estimated to grow at 6%-8%
per annum in view of the low per capita

In-Focus
consumption in India. Also, demand for
the metal is expected to pick up as the
scenario improves for user industries, like
power, infrastructure and transportation.
Large economies of scale, consequently,
high capital cost are the entry barrier for
new players in this industry. Most
domestic players operate integrated
plants. Bargaining power is limited in case
of power purchase, as Government is the
only supplier. However, increasing usage
of captive power plants (CPP) will help to
rationalize power costs to a certain extent
in the long-term. Being a commodity,
customers enjoy relatively high
bargaining power, as prices are
determined on demand and supply.
Competition is primarily on quality and
p r i c e , a s b e i n g a c o m m o d i t y,
differentiation is difficult. However, the
recent spate of consolidation has reduced
the competitive pressure in the industry.
Further, increasing value addition to
aluminium products has helped some
companies protect themselves from the
high volatilities witnessed in this industry.
Currently, India does not have any
organized mode of scrap collection. India

imported Rs 7500 crore worth of total

scrap weighing 20.40 million tonnes in
2013-14. Of which, aluminium
contributed 0.95 million tonnes worth Rs
1120 crore. The industry believes that
metals recycling sector currently is at a
nascent stage. The industry is
unorganized, and large volumes of
unaccountable / non segregated scrap is
inadequately utilized. As a result there is
more burden on primary production
which depletes natural resources. The
i n d u s t r y, t h e r e f o r e , u r g e d t h e
government to protect the interest of
local players by recyclers urged the
government to roll back 5 per cent import
duty on aluminium scrap.
Recycling sector must be supported
and promoted so that end of life
automotive vehicles/white goods/revert
scrap are disposed off in a safe manner
and are utilized back into the ecosystem.
This would be a tremendous boon to the
Indian economy, said Iqbal Nathani,
president of Metals Recycling
Association of India (MRAI).
Nalco holds key in international
aluminium trade

36 February 2015

Nalco's bauxite mines achieved the

highest ever production since inception
with transportation of 6.29 million tonnes
in 2013-14 against previous best of 5.42
million tonnes achieved last year.
Similarly, the company's alumina refinery
plant at Damanjodi also achieved the
highest ever production since inception
with alumina hydrate production of 1.93
million tonnes against previous best of
1.80 million tonnes achieved last year. The
aluminium smelter plant at Angul
produced 3.16 lakh tonnes of cast metal
against previous best of 4.44 lakh tonnes
achieved in the previous year.
The total metal sale during 2013-14
was reported at 3.20 lakh tonnes compared
to 4.03 lakh tonnes sold during 2012-13.
Total metal sales consist of domestic sale
of 2.19 lakh tonnes and export sale of 1.01
lakh tonnes during 2013-14. The total
metal sales during the year were lower due
to production curtailment at smelter plant.
However, the metal inventory for 2013-14
was brought down to 2,149 tonnes from a
level of 5,594 tonnes in 2012-13.