- Domestic consumption witnesses sharp uptick
- Demand for special grades, lack of scrap propelling imports
- Strong domestic demand outlook to keep imports supported
Morning Brief: India’s aluminium ingot imports are expected to increase sharply by 42% to over 290,000 tonnes (t) in FY’24 from around 204,000 t in FY’23, as per BigMint data.
Imports of non-alloyed ingots are expected to increase by 68% on FY basis, while inbound shipments of aluminium alloy ingots (of A356, ADC12, LM6, LM25 grades) are likely to edge up by 30% y-o-y.
Why may imports surge?
Firm domestic demand: Increased activity in sectors like construction, automobile, and power has resulted in a spike in aluminium demand. India is the world’s second-largest producer of primary aluminium, but still imports of aluminium ingots are widespread due often to cost considerations as well as strong domestic demand. In FY’24, India’s aluminium demand is expected to reach 4.5 million tonnes (mnt), with imports of 2.6 mnt.
Infrastructure push: Sustained government focus on infrastructure development further triggered demand for aluminium. The lightweight and high-strength metal is often used in the power sector, and some analysts say the major thrust of demand is likely to come from this sector. Demand for aluminium in India is expected to increase to 8.5-9 mnt by 2033, which would be a twofold increase from the present 4.5 mnt.
Focus on niche grades: Indian producers seem to have prioritised specific high-value aluminium grades, creating a gap for certain basic ingot grades used by various industries. For example, imports of A356 grade, used to make alloy wheels, are being imported in good quantity. Besides, other automobile ingots such as LM6, LM25 are also being imported.
Geopolitical dynamics: The impasse related to shipping in the Red Sea and Suez Canal is leading to a delay in scrap cargoes, on which the domestic producers are so dependent. This has necessitated an increase in imports of ingots in view of strong domestic demand. Further, consequent to Russia’s invasion of Ukraine, Russian aluminium ingot is being diverted to South Asia under the cloud of western sanctions hanging on Russia.
Outlook
India’s aluminium consumption is expected to increase by around 18% in FY’24. Domestic demand is set to rise to around 9 mnt by FY’33. The main demand drivers are infra, auto, packaging, while light weighting applications in the auto sector and for EVs, as well as applications in the railways. In the absence of domestic scrap availability, ingot imports may rise.
Notably, to keep export channels to geographies with carbon taxes wide open, usage of imported scrap and ingots with low embodied CO2 emissions may rise in the mid- to long-term.
