No relief in sight yet for Indian aluminium makers

Government of India has provided relief to the domestic steel manufacturers hit by cheap imports and the global slowdown in commodity price by imposing a minimum import price ranging from $341 to $752 a tonne on 173 steel products. But, the global slowdown has left the aluminium industry still struggling with misearbly thin margins and low production.

Addressing banks’ exposure to the steel industry has been given priority over a potential drop in investments in aluminium, pointed a senior Government official. It is to be noted that banks’ exposure to the entire metals sector, which includes aluminium, is around INR1,02,300 crore.

Over the next five years, the aluminium industry has planned an investment of INR 1,20,000 crore but this has been put on hold due to existing constraints because of the low prices of the metal.

“It is true that aluminium was suffering in the early part of the fiscal, but some revival is being seen by the large manufacturers,” the government official added.

According to the Ministry of Commerce, domestic aluminium production is expected to remain almost flat in 2015-16 while industry-wide capacity utilisation is expected to be at around 50 per cent. The market share of imports in the domestic market stood at around 56 per cent at the end of September 2015-16.

Aluminium makers bearing the brunt of slowdown

National Aluminium Company Ltd, Hindalco and Vedanta Ltd have reported combined earnings before interest and taxes of INR 401.63 crore from the aluminium business so far in 2015-16. Hindalco and NALCO are due to announce their third-quarter results over the course of this week and this will impact the number.

“The steel sector benefits from being part of the index of industrial production. Any impact here impacts headline economic indicators of the country. We continue to make representations with the government while undertaking cost optimisation measures,” said an official of Aluminium Association of India.

The import duty on aluminium remains at 5 per cent and for aluminium scrap it is even lower at 2.5 per cent.