On Monday, August 28, India's significant rating agency, ICRA, stated that given the government's emphasis on infrastructure development, domestic aluminium demand growth is expected to continue solid at approximately 9 per cent over the next two fiscal years (FY24 and FY25). As per the Investment Information and Credit Rating Agency of India Limited (ICRA), India's aluminium consumption is heavily influenced by the automobile industry, with consistent demand projected in FY2024 and FY2025.
Domestic demand growth will surpass global demand growth, according to the rating agency, which predicts a steady future for the domestic aluminium sector. However, the typical car uses less aluminium than the world average. ICRA forecasts increased consumption and a shift to electric vehicles. While domestic demand remains strong, global aluminium consumption may stay down in the current fiscal year. A bleak macroeconomic outlook is anticipated to dampen global aluminium demand in the short term. In CY2023, global aluminium consumption will likely rise by around 1 per cent.
Jayanta Roy, Senior Vice-President and Group Head of Corporate Sector Ratings ICRA said, "The automotive sector plays a pivotal role in the overall consumption of aluminium in India. After a stellar performance in FY2023, automotive demand is expected to remain steady in FY2024 and FY2025. In addition, the average quantity of aluminium used per vehicle in India remains significantly lower (around 40-45kg) compared to the global average of roughly 160-200 kg. ICRA believes that focusing on vehicular weight reduction to improve fuel efficiency would entail a higher per-unit usage of aluminium going forward. Further, a significant transition to electric vehicles in the coming decade would also aid domestic aluminium demand in the long term."
Furthermore, global metal supply is improving, mainly in China, and is projected to result in a metal balance surplus in the current calendar year. Chinese consumption still faces headwinds, particularly from poor demand in the building and construction sectors. As a result, aluminium prices are projected to continue under pressure in the short term, with any improvement dependent on a greater rebound in Chinese demand and an improvement in global mood, according to ICRA.
“The Central Government’s massive infrastructure development plans, growing urbanisation levels, Housing for All schemes along with railways investment in the metro rails network and aluminium-bodied Vande Bharat trains bode well for the domestic aluminium demand. In addition, the Government’s conducive policy is likely to support the rapid transition to new age technologies and clean energy, which remains the tailwind for spurring domestic aluminium demand”, added Jayanta Roy.
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