Trade war: Aluminium cos need to expand markets beyond US, say analysts

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Indian aluminium makers need to widen their export markets beyond the US in the light of the trade barriers levied by the Donald Trump administration. US still accounts for a sizeable 11 per cent share of aluminium exported by India and domestic makers can explore alternate destinations to avoid the 10 per cent duty on the white metal, analysts suggested.

“The EU (European Union) could be a potential market for primary aluminium makers in India. Aluminium demand in the EU region is likely to stay buoyant on growth in transportation and construction sectors. South East Asia has been traditionally a strong market in volumes and aluminium makers should look to ramp up exports after the prohibitive levies by the US”, said a metals sector analyst.

Global demand for aluminium continues to outpace supply. The supply deficit has stemmed from geopolitical decisions like US sanctions on UC Rusal, the largest aluminium producer beyond China and curbs on Norsk Hydro's Alunorte alumina refinery in Brazil. The Alunorte refinery, the world's largest, is constrained to operate at half its rated capacity till it complies with a regulatory order. The refinery, with an annual production of 6.4 million tonnes per annum, ships 86 per cent of its alumina beyond Brazil.

In FY18, South Korea and Malaysia were the top importers of Indian aluminium with a share of 31 per cent and 30 per cent respectively. Apart from the US, which had a share of 11 per cent, Turkey (9 per cent), Japan (5 per cent), Bangladesh (4 per cent) and Spain (4 per cent) were the other key countries to which Indian aluminium was shipped.

“US import duties are a worry but more disconcerting for the industry is the anticipated flood of aluminium imports especially from China as a result of this levy. Imports already have over 50 per cent share in our aluminium consumption and any growth will force the domestic producers to fall back more on exports”, said a senior executive with an aluminium company.

Indian aluminium exports to the US are minuscule when compared to what the superpower sources from Canada, China and the Middle East. Each year, around 125,000 tonnes are exported to the US, 60 per cent of which are made up by aluminium ingots.

In 2017, US had an aluminium making capacity of 1.8 million tonnes against which it produced 0.78 million tonnes. But, its total aluminium consumption was significantly higher at 5.51 million tonnes of which 5.04 million tonnes were fed by imports.

Canada, Russia, UAE and China together comprise 73 per cent of the total aluminium imports into the US. India’s share in the US aluminium import basket was a meagre two per cent. But, the country aspired to take its share of exports to the US to five per cent in the coming years with a focus on high quality exports through long-term strategic tie-ups.

Indian aluminium exports to the US are valued at $350 million. This means the Indian producers have only 0.8 per cent share to the overall aluminium exports to the US of the order of $42.2 billion.

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