Global headwinds, slowing economy shrink Q2 domestic aluminium demand by 6%

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Global headwinds and a slowing economy led to the domestic aluminium demand falling 6 per cent during the September quarter to 0.96 million tonnes (mt).

Domestic demand has grown a marginal 0.1 per cent year-to-date. Firm demand in aluminium  consumption has been one of the bright spots for domestic producers, helping them combat headwinds like tepid  LME (London Metal Exchange) prices.

Prices on the LME slumped 14 per cent to $1,762 per tonne at September end, compared to last year. 

Of late, Indian aluminium demand is aligning with the global demand, where growth is expected to fall 0.4 per cent in CY19, the lowest since the global financial crisis of 2008. Global markets are projected to witness a deficit of 1.2 mt in calendar 2019, 0.1 mt shy of the 1.3 mt recorded in CY18.

“De-growth has been noticed in case of Flat Rolled Products because of subdued demand in transportation and construction. Slowdown in manufacturing, fragile consumer demand, and subdued investment have dragged  consumption,” said an industry source.

In Q1 of FY20, the country's GDP growth touched a six-year low of five per cent. Latest estimates by the Reserve Bank of India (RBI) have pegged the domestic economy to grow at 6.1 per cent in FY20.

As domestic demand subsided, imports of aluminium scrap went downhill, declining eight per cent in Q2 of this fiscal as against a spike of 25 per cent growth clocked in the corresponding period of Fy19. The plunge in imports should offer solace to the  primary aluminium producers who have been wrestling with a swarm of imports.

In last fiscal year, aluminium imports into the country touched  an all-time high of 1.96 mt and valued at $2 billion, representing one per cent of the total imports by value. Scrap imports were the most pronounced, accounting for 57 per cent of the overall aluminium imports. A low import duty of 2.5 per cent was driving inbound scrap  volumes.

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