Global aluminium prices on the LME have dropped 21 per cent year-on-year during April-June to average at $1793 per tonne
Demand for aluminium in India grew by seven per cent in April-June quarter of FY20, but that failed to perk up producers as consumption growth moderated in industries facing liquidity crunch.
Sales of aluminium companies fell by 10.8 per cent in the period as imports grabbed a bigger share of the consumption pie.
“The share of imports to domestic aluminium consumption has risen to 60 per cent at the end of June. Overall imports witnessed spike of eight per cent while scrap imports rose eight per cent in the June quarter. The unabated rise in imports is worrisome for the primary aluminium producers,” said an industry source.
Aluminium imports peaked at 2.3 million tonnes in FY19, resulting in a forex outgo of $5.5 billion or one per cent of the imports by value.
Besides flagging domestic sales, international aluminium prices on the London Metal Exchange (LME) entering the bearish zone has disquieted major players like Hindalco Industries, Vedanta Ltd and the state run National Aluminium Company Ltd (Nalco).
Global aluminium prices on the LME have dropped 21 per cent year-on-year during April-June to average at $1793 per tonne. The LME prices for aluminium for the cash buyer have plunged further to $1762 per tonne (as on August 19).
On a macro perspective, the festering US-China trade conflict continue to pound the commodity markets.
Subdued global industrial and economic activities have resulted in tepid demand growth. Though domestic demand in China is expected to gather momentum after the announcement of the stimulus package, market deficit for aluminium is pegged at 1.2-1.5 million tonnes in calendar 2019. Despite the projected crunch, LME prices are forecast to be depressed owing to negative market sentiment.
But the glimmer of hope comes from flat rolled products (FRP) segment where global demand is expected to grow at a steady pace of three per cent. In calendar 2019, the global can stock market has started signs of growth underpinned by demand of continuous shift from glass to the cans, new can sizes, new end use segments like energy drinks, sparkling water and crafted beer in aluminium packaging. In the domestic market, FRP demand is expanding at a pace of four per cent year-on-year in Q1 of FY20, strengthened by construction and packaging segments. The FRP segment is expected to log compounded annual growth rate (CAGR) of seven per cent between FY18 and FY22, benefiting players like Hindalco Industries.