Aluminium consumption to tilt towards construction, packaging sectors

CARE Ratings expects consumption of metal to grow at a CAGR of 3.5% in next 2-3 yrs

Aluminium consumption pattern in the country is set to shift to emerging sectors like construction, transportation and packaging in the future. Currently, the electrical segment boasts of the highest share in aluminium usage, accounting for around 37 per cent of the overall consumption of the metal. This is in contrast to the world average that stands at 14 per cent for the electrical sector. Transportation and construction lead with a share of 26 per cent each in global aluminium consumption.

Producers of the metal opine that higher compounded annual growth rate (CAGR) in sectors such as transportation, construction and packaging will drive aluminium consumption further.

The government's thrust on indigenous manufacturing through its flagship 'Make in India', Smart City initiatives, along with the transition to newly rolled out goods and services tax (GST) are expected to boost aluminium consumption in the years ahead. However, there would be several caveats, said the aluminium makers while adding that threat of cheaper imports from China, besides the raw material crunch hampering the domestic market were among the major impediments facing the sector. 

T K Chand, chairman, National Aluminium Company (Nalco) and president, Aluminium Association of India (AAI) said: "The aluminium sector will shine in the coming days with aluminium prices crossing $2,000 per tonne but the sector is likely to face shortage in input raw material, and prices are likely to remain high. Cost push factor on account of raw materials, coupled with market sentiment on production cut in China are likely to hold the price line."

The Smart City project is likely to accelerate development in power infrastructure, building & construction and consumer durables segments. This, in turn, would lead to an increase in aluminium consumption.

GST roll-out is expected to work for the benefit of the aluminium industry, especially the organised producers. A large part of the aluminium industry falls under the unorganised sector. These include some of the scrap based secondaries and the highly fragmented extrusion segment. The GST regime is expected to bring most of such players in the organised segment, thereby, creating a level-playing field for those who were otherwise left beyond the ambit of the organised sector.

According to a source associated with the Hindalco Industries,  consumption pattern will change and grow in packaging, construction and transportation sectors.

Consumption of aluminium has been growing since the past eight decades. However, growth has been primarily in the commodity grade or the conventional usage segment and not in the value added segment.

According to a report by CARE Ratings, consumption of aluminium in the country is growing at a CAGR of 3 per cent from 2012-13 onwards. Surplus stock is exported mainly to South Korea, Malaysia, Mexico, Italy, Turkey, USA, Taiwan, Spain, Japan, Indonesia, Bangladesh, Singapore, Brazil and Netherlands. CARE Ratings expects consumption of aluminium to grow at a CAGR of 3.5 per cent during the next 2-3 years.