As the market slumps and a slow recovery is expected in 2023, only India stands out from other countries in terms of aluminum production and consumption. Indeed, the government’s push for new infrastructure, particularly green energy, continues to support domestic consumption and the overall stability of aluminum prices.
The country is already the world’s second-largest producer of aluminum, as well as its third-largest consumer. However, many industry analysts predict that India’s aluminum demand will double within the next decade. This could impact short- and long-term aluminum price forecasts, as shown by MetalMiner Insights.
Experts continue to believe that slowing growth in the global economy, including China, will reduce demand and push down aluminum prices. In fact, many believe that LME aluminum spot prices could drop as much as 13% year-on-year in 2023. This would result in a price of approximately USD 2,365 per tonne. But in India, there are no such concerns.
Infrastructure investment drives India’s aluminum consumption
According to a report filed by Reuters, Hindalco executive Naresh Kaur said it was India’s turn to follow China in boosting metal consumption. Currently, per capita aluminum consumption in India remains at around 3 kg. By comparison, China weighs a staggering 31.7 kg, and the rest of the world weighs around 12 kg. However, Kaul said demand for “green” metals in India could reach around 9 million tonnes by 2033. This would be a significant increase from the current 4.5 million tonnes. On the other hand, India contributes only about 5% to the world’s total aluminum production.
The Indian government has mainly focused on infrastructure through schemes such as ‘Make in India’. All of this is likely to increase demand for aluminum in sectors such as power and construction.
After Russia’s invasion of Ukraine and the COVID-19 pandemic, the global aluminum market started experiencing delays, especially in China and Europe. Meanwhile, India was starting to see an upturn in aluminum due to huge domestic projects such as ‘Vande Bharat’ trains, metro rail development, 100% electrification drive and increasing green power generation capacity.
In fact, many experts in India believe that this increased demand for aluminum will receive impetus from the transportation industry due to the shift to “green energy” in public and private transportation. After all, electric vehicles continue to gradually replace fossil fuel vehicles across the subcontinent, and their prices are covered every month in his MetalMiner free monthly metals index. This significantly increases the aluminum intake for vehicle weight reduction. On the other hand, as India moves from a growth economy to a major global economy, aluminum consumption will increase in almost all other sectors related to the growth of the Indian economy, such as urbanization, housing, and public infrastructure.
Bauxite reserves could also impact local aluminum prices
A few weeks ago, renowned rating agency ICRA released a report predicting that India’s aluminum demand will grow by 9% in the next two financial years. According to the company’s analysis, this growth rate will outpace the expansion rate of global aluminum demand.
ICRA has identified the automotive sector as a key driver of aluminum consumption in India, with consistent demand expected over the coming financial year. As mentioned earlier, this is primarily due to consumers’ transition to electric vehicles.
In fact, downstream, India’s aluminum exports have also increased in recent years. On the other hand, the reserves of raw material bauxite are the 7th largest in the world. Recently, the government established the National Mineral Exploration Trust to boost the production of aluminum and make the required amount of raw material available to the industry. India also has vast reserves of bauxite on its east coast, which remain untapped so far.
Written by Saurabh Darabshaw
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