Construction, auto to drive aluminium demand

The country's aluminium demand is likely to grow 14 per cent this year on a booming trend in construction, automotive and consumer durables sectors.

These sectors consume about 40 per cent of India's total aluminium, according to a report by Icra. World aluminium consumption is expected to increase 9 per cent in 2007 to 37.1 million tonne (MT) with China's consumption forecasted to increase 30 per cent to 11 MT.

The growing demand would also be supported by the government's electricity generation programme where the metal is used in overhead high power transmission wires. The generation sector consumes about 31 per cent of total aluminium produced in India and is growing at a rapid 10 per cent.

According to industry estimates, consumption grew 12.6 per cent in 2006 to around 1.08 MT, driven by a double digit growth in aluminium castings, extrusions and wire rods, consumed mainly in transportation, building and electrical segments respectively.

Consumption is estimated to have increased at a five-year compounded annual growth rate (CAGR) of 12.9 per cent. Secondary aluminium demand also shot up to 0.6 MT last year.

India's production of aluminium aggregated 1.11 MT in 2006, accounting 3.3 per cent of the global production. With a production of 13 MT in 2006, the country accounted for around 7.3 per cent of the global bauxite production.

During the last few years, the report says, the domestic aluminium market witnessed a growth in demand particularly from the power, automotive and housing sectors.

Recent government initiatives (SEB restructuring, and thrust on transmission and distribution) have created an environment for rising investments in the power sector.

Power generation capacity additions are expected to the tune of 68,869MW during the 11th Five Year Plan (2008-12).

Based on the expected capacity expansions during the 11th Plan and associated investments in transmission and distribution, the Working Group on Power for Eleventh Plan has estimated an aluminium requirement of 1.6 MT during 2008-12.

The automotive sector is the second largest consumer of aluminium. Automotive production increased 13.8 per cent in 2007, as compared with 15.2 per cent in 2006. Importantly, India is emerging as a global hub for auto components, which is likely to fuel demand further.

The building and construction sector is also poised to grow further. The current housing shortage is estimated to be around 25 million units in urban areas and 15 million units in rural areas.

Although India's annual per capita aluminium consumption has increased from 0.6 kg in 1996 to 1 kg in 2006, China's annual per capita consumption has increased from 0.81 kg in 1991 to 8.5 kg in 2006.