The price of aluminium is likely to go up in the medium term due to factors like surge in demand, Crisil Research on Tuesday said.
The price of the metal fell 45 per cent from the March 2022 peak to around 2,400 dollar per tonne now due to factors like lockdown in China.
"Aluminium prices have likely bottomed out and should rise over the medium term, supported by two structural drivers: limited smelter capacity additions and uptick in demand," it said in a statement.
Limited capacity additions over the next five years will be crucial to pick up in the prices of aluminium, it said.
The demand for aluminium is likely to see a structural growth over the medium term on account of global green investments, including electric vehicles, solar panels and renewable energy grids, most of which have high intensity of aluminium use.
"Green investments across major economies will lead to a strong uptick in demand for aluminium, but global capacity addition is expected to fall from 20 MT during the past decade to just 3-4 MT over the next five years," Crisil Research Director Hetal Gandhi said.
Domestic smelters have also expanded aggressively over the past decade, adding over 2.4 MT of capacity, registering an annualised growth of 9 per cent till FY22.
However, domestic demand has seen slower growth of 4 per cent during the period on account of capacity expansion by power sector and cable conductor exports, with the excess produce finding its way into export markets.
India exports 58-62 per cent of its primary aluminium production.
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First Published: Aug 30 2022 | 7:01 PM IST