Downward pressure on Indian aluminium prices to continue: CRISIL

Non-ferrous metal prices plummeted in 2015 due to global slowdown and massive overcapacity, especially in China. Tailing these global trends, aluminium prices in India are estimated to decline by 15-17 per cent in the current fiscal.

Consequently, the operating margin of aluminium sector is expected to tumble by 1,000-1,200 basis points (bps). In the wake of deteriorating profitability and rising imports, the government imposed a minimum import price (MIP) on 173 steel products on February 5, 2016, for six months. This levy comes as a breather for the ailing industry, as it is expected to curb imports and also marginally improve pricing flexibility of producers in the short term.

No MIP/similar measures have been announced to help the Indian aluminium industry. Hence, it is expected domestic aluminium prices will continue their southward sojourn and decline further by 3-5 per cent next fiscal. Moreover, with use of high-cost captive coal, the profitability of domestic aluminium players will deteriorate and some may even incur cash loss.