India's aluminium consumption set to increase

The Indian economy has arrived at a point where a non-ferrous metal such as aluminium will come in for increasingly significant application in many areas, besides electrical and electronics, which now has a preponderant share of 48 per cent of this country’s total use of the white metal against world average of 11 per cent.

No wonder, the chairman of National Aluminium Co (Nalco), Ansuman Das, believes this metal’s “growth story here has begun to unfold and as we go forward, the per capita consumption of aluminium, now at 1.3 kg, can only rise. Our neighbour, China, has an aluminium per capita use of 14 kg”. But then in every metal, China is miles ahead of India.

The issue is not that India’s aluminium production of 1.7 million tonnes (mt) is way behind China’s 20 mt. What inspires confidence is that the three constituents of the local industry — Vedanta, Hindalco and Nalco — have in the face of some major raw materials cost inflation, falls in London Metal Exchange (LME) prices and the coal linkage plans not always working satisfactorily are negotiating the ongoing difficult period for the metal better than most of their peers abroad.

Nalco’s metal production loss of 30,508 tonnes to 413,089 tonnes in 2011-12 was much due to coal supply problems. Procurement of coal by the company by way of imports and local auction purchases, both proving to be expensive, could not fully offset the shortfall in supply by Mahanadi Coalfields. Vedanta remains in a quandary about bauxite availability. This is in spite of the Odisha government’s commitment to give it sufficient access to deposits of this mineral. Hindalco complains about cost push due to the falling quality of bauxite.

The phenomenon, however, is unavoidable in ageing mines. Hindalco, too, is meeting with local protests as it tries to open new mines and operate an existing one in Odisha.

Considering the abundance of bauxite and thermal coal here, the country has no reason to be boastful of the size of its aluminium industry. But, as Das says, the world is taking note of “our growth programme, which will leave the country with aluminium capacity of over 3 mt by 2015-16”. In new capacity creation, all three groups are participating by way of new capacity and expansion.

Das at this stage refrains from saying anything about the course of smelter expansion at Angul in Odisha. Other expansion plans in upstream mines and the refinery at Damanjodi and power complex at Angul, however, remain in place.

If Nalco is to maintain its share of the domestic aluminium market, which, according to Das, should continue to grow at a pace higher than our GDP (gross domestic product) growth rate, then the imperative of it building a new smelter cannot be overemphasized. Hindalco, which made 574,000 tonnes of primary aluminium in 2011-12, is set to treble its metal capacity to 1.7 mt by building three new smelters. To maintain the group’s lead in the industry, Vedanta Aluminium is expanding capacity of its smelter at Jharsuguda to 1.75 mt.

“An eight to nine per cent growth in annual demand is enough reason for all constituents of the aluminium industry to pursue major growth. I believe the electrical sector will continue to remain the biggest user in the context of nearly 80,000 Mw new power capacity development programme in the 12th Plan. At the same time, I expect increasingly bigger volume of aluminium use by transport, construction, packaging and consumer durables,” says Das.

So, the sectorial share of aluminium use in India, which now is heavily slanted in favour of the electrical sector, will undergo changes, albeit slowly. Nalco might introduce a customized product occasionally, but its production focus will remain primary aluminium.