The closure of excess aluminium smelter capacities and a pick up in demand for the metal in the European markets
would support higher prices in the rest of the current financial year (FY).
Aluminium prices on the London Metal Exchange (LME) are ruling at multi-year highs of $2100 per tonne. An industry outlook report by Care Ratings has predicted average aluminium prices to hover in the range of $1900-2100 in the remainder of FY18.
"The crackdown on old, polluting smelters by the China government will see four million tonnes (around 10 per cent) of aluminium capacity going offline this winter. The cut down in production will buoy demand and support prices for aluminium in FY18", said an analyst.
China is the largest producer of primary aluminium with a share of 54 per cent in the global market.
Sources: LME, Union Mines Ministry
Aluminium has continued its bull run with global prices rising by 23 per cent to $1961 per tonne in April-September compared with $1596 per tonne in the corresponding period of FY17. Environment and supply-side restrictions in China coupled with higher input costs and strong industrial activities supported LME prices.
India's aluminium production in this period moved up 3.5 per cent from 0.85 million tonnes to 0.88 million tonnes. The production increased due to improvement in operational efficiencies of the manufacturing units.
Global aluminium demand is expected to grow four per cent in 2017.
In the domestic market, demand has shown signs of improvement after September led by user industries. Due to slow demand growth in the domestic market in September, imports, including scrap, fell 17 per cent in Q2.
Hindalco, the largest aluminium producer, saw its production going up two per cent in the July-September quarter.
"All our new plants continue to operate at designed capacity. In the quarter, stable operations and supportive macros delivered strong results. We maintained a positive view of the growing demand for automotive aluminium sheet globally, with growing demand for electric and hybrid vehicles," Satish Pai, managing director, said at the company's recent earnings conference call.
At government-owned National Aluminium, production was up 10.3 per cent during April-September. Vedanta posted a record production of 0.4 million tonnes.