Aluminium industry in India through Porters five forces:

1. Market Rivalry: Being a commodity, there is less differentiation and hence the competition is primarily on quality and price. Cost efficiency is the key. Low cost manufacturer are benefitted. Major Players- Hindalco, Nalco, Vedanta. The fully vertically integrated companies dominate the industry in size. Value addition has helped in protecting companies from competitive pressure from downstream industries. Significant economies of scale helps in lowering the cost. 2. Entry Barrier: a. Economies of scale: As far as the sector forces go, scale of operation does matter. Benefits of economies of scale are derived in the form of lower costs and better bargaining power while sourcing raw materials. It may be noted that the minimum economic size of a fully integrated greenfield smelter is around 250,000 tonnes. The aluminium companies, which are integrated, have their own mines for key raw materials such as bauxite and coal and this protects them from the potential threat for new entrants to a significant extent. They also have their own power plants as it is a major cost driver. b. Capital Intensive: Aluminium industry is a highly capital intensive business. An economically viable project would cost around 13-14000 Cr investment. c. Higher gestation period: The gestation period for an economically viable green field plant is over 4 years while for a brownfield project, (modernization / capacity addition) the gestation period is relatively lower between 1.5 years to 2 years. d. Government Policies: The government has a favorable policy towards aluminium manufacturers. In fact to protect the domestic industry, recently, the government has imposed duty on value added products like foils and rolled products from the Chinese markets. However, similar to other sectors, there are certain discrepancies involved in allocation of mines and land acquisitions. Furthermore, regulatory clearances and other issues are some of the major problems for the new entrants.

3. Bargaining power of suppliers:

Low for fully integrated plant.

4. Bargaining power of Customer:

Being a commodity, customers enjoy relatively high bargaining power as prices are determined on demand and supply. 5. Threat of substitute: Major substitute are steel and copper. There is threat for aluminium from substitutes such as steel due to lower cost, and copper due to higher conductivity. However due to high strength and weight ratio, durability high corrosive resistance, makes the threats from substitutes low. Also the per capita consumption of aluminium in india is relatively very low as compared to USA and China. And the industry is growing at the rate of 7-9% annually, and there is potential for more growth in the sector.