Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Indian aluminum industry will see adverse affects of the COVID-19 pandemic with import and export of primary aluminium and scrap likely to drop, according to a report by Tianfeng Futures Research Institute in China. India produced 3.559mn mt of electrolytic aluminium in FY2020, which was around 31pc of the total output in Asia (excluding China).


The report suggested that offshore trading of India’s aluminium industry, bauxite and alumina will be restricted due to the resurgence of COVID-19.


During the lockdown period, the primary aluminium production facilities at the three aluminium companies in India are operating normally but downstream processing plants have been hit. This terminal stagnation will lead to a decline in VAP orders, which will also have a negative impact on the strategic expansion of Nalco’s Angul Industrial Park, the report claimed.


Vedanta Resources
Vedanta Resources produced 1.8mn mt of alumina and 1.90mn mt of primary aluminium. The report stated that the company is worried about downstream shutdowns and drop in consumption. At present, Maharashtra, Karnataka, and New Delhi are among the states that have strict lockdown where all private economic activities have ceased. 


Indian Aluminium Corporation (Hindalco) produced 2.7mn mt of alumina and 1.31mn mt of primary aluminium and 319,000mt of value-added products (VAP) in 2020. The report findings suggest that though India exempted the continuous production process of key production facilities — allowing primary aluminium smelters to operate — domestic demand was severely impacted.  Automobile/transportation, construction and construction, electrical and other industries were shut down. The Jan-March consumption growth rate fell 55pc from the prior-year period and VAP output fell sharply.

As the situation improved in December 2020, Hindalco had unleashed plans to expand its alumina production capacity by 500,000mt in Jan-March quarter in 2022, expand the US automotive processing line, China’s Changzhou automotive finishing line and Brazil rolling line; focus on development of can stock, ABS (Automobile body sheet) and extruded profiles and other industries. It planned on increasing the production capacity of 49,000mt of extrusion materials to 160,000mt per annum. Tianfeng Futures report claims the pandemic will now have a negative impact on Hindalco’s strategic deployment.


National Aluminum Corporation of India (Nalco) is a government public sector enterprise under the Ministry of Mines of India. Its bauxite mines include Panchpatmali, which produced 7.32mn mt of ore, 2.161mn of alumina, and 438,000mt of electrolytic aluminium in FY2020.

Nalco’s bauxite output has reached 7.365mn mt. The company currently intends to increase investment to develop Pottangi bauxite, alumina refinery and coal transportation projects with the investment of Rs7bn. This will increase Nalco’s bauxite production capacity to 10.5mn mt from 7.3mn mt and alumina production capacity to 3.1mn mt from 2.1mn mt. The company plans to expand its aluminium smelter and power plant projects by spending Rs2.2bn and build aluminium industrial park around  Angul plant.


Impact on Bauxite Imports
The report claims that the basic reserves of Indian bauxite are about 590mn mt and are widely distributed. Most of the output is purchased by local aluminium companies, and a small part is exported. Due to the inconvenience of domestic transportation in India, the high cost of land transportation, and the average quality of ore, the competitiveness is declining, claimed the report. 
With the substantial development of the Guinea project, Indian bauxite has gradually withdrawn from China. In 2019, China alone imported 330,000mt of Indian bauxite. The outbreak of the pandemic in India has had little impact on the supply of bauxite.


Alumina Imports
The report claimed that India’s alumina imports have gradually declined in recent years because of its mission to reduce import dependence and increasing domestic supply. In early-2017, Vedanta proposed to increase domestic alumina production capacity in the next few years and limit the company’s annual alumina imports to less than 500,000mt. Hindalco and Nalco also have plans to expand alumina production in 2021.


The report added that though India has sufficient domestic electrolytic aluminium production capacity, 50ps of domestic aluminium demand is met through imports. India imports both, primary aluminium and scrap. In 2020, it imported 591,000mt of primary aluminium and 1.28mn mt of aluminium scrap. 


Al exports to China to drop
In 2020, due to the significant increase in the Shanghai-London aluminium ratio, China’s electrolytic aluminium import arbitrage window had opened. However, due to the shrinking domestic demand and a surplus, India exported aluminium ingots to China. China’s monthly import data suggests that the proportion of aluminium ingots imported from India can increase up to 50pc. In 2020, around 290,000mt of Indian primary aluminium was imported into China, second only to Russia. 


Due to the resurgence of COVID-19, service and manufacturing sectors in India are severely hit which will reduce the import of raw material. At the same time, the economic recovery of other overseas countries and regions have accelerated, the Shanghai-London ratio has returned below 1.18, China’s import window has been closed, and demand for Indian aluminium ingots in export market has weakened.

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