Summary
The Indian aluminum
industry is segregatedinto primary and secondary or downstream
aluminum producers. The industry was controlledtill 1989. Under the
earlier Aluminum Control Order all domestic manufacturers
wererequired to ensure that at least 50% of their ingot production
was of electrical grade.
The Indian aluminum
industry consists of fiveprimary aluminum producers and a host of
downstream producers. The total installedcapacity of primary
aluminum in India is 0.645mn ton. The total installed capacity
ofrolled products, extrusions and foils is 0.5mn ton.
National Aluminum
Company Ltd (Nalco),Hindalco Industries (Hindalco), Indian Aluminum
Company Ltd (Indal), Madras AluminumCompany Ltd (Malco) and Bharat
Aluminum Company Ltd (Balco) are five integrated aluminumproducers.
Hindalco and Indal also manufacture value added downstream
products.
Bauxite is the main raw
material formanufacturing aluminum. India is endowed with abundant
quantities of high quality bauxite.Bauxite mining is the cheapest
in India. Producers like Nalco and Hindalco who have theirown
captive mines and captive power facilities are the lowest cost
producers of aluminumin the world.
The consumption pattern
of aluminum in Indiais highly skewed towards the electrical sector.
The latter accounts for 36% of the totalaluminum demand as compared
to 9% worldwide. Abroad, the construction, packaging
andtransportation sectors account for more than 70% of the aluminum
consumption whereas inIndia these account for only 40% of the total
aluminum demand.
Aluminum prices have a
great bearing on theperformance of the aluminum industry. Prices in
the local market closely follow the priceson the London Metal
Exchange (LME). The prices on the LME in turn reflect
thedemand-supply situation in the world aluminum markets. The
domestic demand/supply balanceand landed cost (LME prices, import
duties and exchange rate) are the determinants ofdomestic aluminum
prices.
Worldwide aluminum
outlook is bearish due toweak demand from Japan. Moreover some of
the producers who had resorted to production cutshave now resumed
normal operations. The extra capacity is not being absorbed by
themarket, which is reflected in the depressed aluminum
prices.
With the weakening in
aluminum prices and slowdown in demand from the electrical sector
the short term outlook for the Indian aluminumproducers appear
unexciting. In the long term the development of new applications
andgrowing consumerism will further increase aluminum demand. The
long term outlook for thesector is bullish.
