Industry Forecast - Aluminium: Slipping Into Deficit

15 De c 2014

India

Me tals

Hindalco

BMI View: A domestic shortfall in bauxite will continue to hinder growth in Indian aluminium production over the coming quarters. We expect the balance in aluminium
output to shrink from 92kt in 2013 to -3.4kt in 2018. Indian companies will increasingly venture abroad to secure bauxite reserves due to a dearth of domestic mining
opportunities.
We forec as t Indian refined aluminium output to inc reas e at an average c lip of 4.0% per annum to reac h 2.1mn tonnes (mnt) by 2018. Domes tic produc ers will
s truggle to inc reas e output s ignic antly due to environmental protes ts whic h will c ontinue to hinder bauxite mining in the c ountry. Furthermore, s ubdued
aluminium pric es will put a lid on produc tion growth. We forec as t aluminium pric es to average USD1,900/tonne in 2015 and USD2,000/tonne in 2016,
c ompared with an average pric e of USD2,053/tonne in 2012.

Aluminium Production, Consumption & Balance

Aluminium Produc tion, Cons umption & Balanc e (2003-2018)

f = BMI forec as t. Sourc e: USGS/ BMI

C l i ck h e r e to e x p l o r e d ata

India is the s ixth-larges t produc er and fth-larges t c ons umer of rened aluminium in the world, both at around 3.6% of global total in 2013. Major aluminium
produc ers in the c ountry inc lude s tate-owned National Aluminium Company Ltd (NALCO) and private s ec tor units s uc h as Bharat Aluminium Company
Ltd (BALCO), Hindustan Aluminium Company Ltd (HINDALCO) and Vedanta Aluminium.
Des pite the ric h bauxite res erves in India, domes tic aluminium produc ers have s truggled to operate at full c apac ity due to the dic ulties in s ec uring bauxite.
Major aluminium produc ers have been forc ed to c urtail operations over the pas t year due to a domes tic s hortfall in bauxite, c aus ed largely by delays in the
permitting proc es s of mine and environmental c learanc es . Indeed, Vedanta's Lanjigarh alumina renery plant in Odis ha has been forc ed to s hut down on
s everal oc c as ions due to the lac k of raw materials . Over the c oming years , Indian aluminium produc ers will inc reas ingly s eek bauxite res erves abroad in
order to c over the s hortfall in domes tic output.

This mate rial is pro te cte d by inte rnatio nal co pyright laws, and use o f this is subje ct to o ur Te rms & Co nditio ns.
2015 Busine ss Mo nito r Inte rnatio nal Ltd

China Dominates
Global - Aluminium Produc tion by Country (2013)

Source: USGS

Consumption Growth Edging Higher

We expec t Indian rened aluminium c ons umption to head higher over the c oming years , in line with our optimis tic outlook on the wider Indian ec onomy. We
forec as t c ons umption growth to average 5.2% over our forec as t period, making the c ountry a key driver of demand growth in the global aluminium market.
Apart from growing demand for automobiles , the growing auenc e of Indian c ons umers will s pur s pending on hous ing and white goods as the c ountry
undergoes rapid urbanization.
Environmental Concerns A Key Threat
Growing c onc erns over the environmental impac t of mining ac tivities will c ontinue to s tie growth in the aluminium s ec tor. For ins tanc e, Vedanta's
environmental c learanc e for its Niyamgiri mine was c anc elled in 2011 following erc e oppos ition from environmentalis ts and the loc al c ommunity. Cruc ially,
delays and c anc ellations throughout the s upply c hain c ould undermine India's drive towards s elf-s uc ienc y. State governments have invited inves tment in
downs tream alumina refining and aluminium s melting, but the lac k of progres s in opening up bauxite mines s ugges ts to us that India will s truggle to ac hieve its
full potential in aluminium produc tion over the c oming quarters .

This mate rial is pro te cte d by inte rnatio nal co pyright laws, and use o f this is subje ct to o ur Te rms & Co nditio ns.
2015 Busine ss Mo nito r Inte rnatio nal Ltd