Competitive
analysis
The entry barriers for
setting up an integrated aluminum plant are really high.
This#includes bauxite mining, alumina refining, and smelting of
alumina into aluminum. The latter requires continuous and
consistent supply of power. Hence, a captive power plant is
essential. Project costs for setting up an integrated unit with a
capacity of 0.25 mn ton requires investments of Rs80bn. Hence,
large industrial houses or multinational aluminum companies can
only undertake the project. Size is also an important factor with
economies of scale playing an important role.
Among the Indian
companies, Hindalco and Nalco have substantial capacities with
captive power facilities and are relatively protected from power
shortages unlike other Indian companies namely Indal, Balco and
Malco. The entire sector faces threats from cheaper imports with
the aluminum prices being linked to the LME. Aluminum companies
from Russia, China as well as Baharain are known to dump cheap
aluminum into the domestic market
On the raw material
front, the integrated aluminum companies are protected. These have
their own bauxite mines and also possess their own power plant. The
only commodities procured are CPC coke, caustic soda, and aluminum
flouride as well as coal/steam/furnace oil.
Aluminum faces threat
from substitute materials such as steel, plastics, HDPE and copper.
In the electrical sector, aluminum faces threat from copper, which
is a good conductor. However, copper is more expensive than
aluminum. Steel is used predominantly in automobiles in India. In
the developed nations, aluminum is used in car bodies. Audi - the
German car is predominantly made of aluminum. Another area where
aluminum finds use and could replace steel is in the manufacture of
aluminum wheels.Hindalco and Nalco have already made a foray into
the manufacture of aluminum wheels.
In the packaging sector
aluminum faces competition from plastics and HDPE. Aluminum foils
are mostly used for packaging food items. Beer as well as soft
drink cans is another application where aluminum is used to a great
extent. However in India these are either served in tetra packs or
glass bottles. Nalco and Hindalco are mulling over the possibility
of entering this segment. The use of aluminum cans have not really
caught on, so producers would be reluctant to install a aluminum
beverage can unit.
Integrated companies
which are able to control costs and are able manufacture
specialized value added products would be in the best position to
capitalize on the growing demand for this metal with a pick up in
the industrial activity.
