Indian traders and producers of aluminum are seeing better returns. In the past two weeks, there’s been forward movement in local aluminum prices, partially because of a pickup in demand in the international market, forcing India’s aluminum community to sit up and take note.
Average price per ton on the London Metal Exchange (LME) has gone up, moving past the US $2,000 mark, which is a far cry from the low of US $1,693 of February 2014. Way back in 2012, it had touched $2,200 but after that, it has all been mostly downhill.
Demand had also slacked off in the interim. Analysts attribute the current renewed interest to a high physical delivery premium, but at the same time, the supply-demand situation, too, has taken a positive turn. Many expect demand to outstrip supply.
A recent forecast from Alcoa, the largest US aluminum producer, claims demand will exceed production this year. The world’s largest producer, Russia’s UC Rusal, too, has forecast that in 2014 world aluminum consumption will increase by 6.5 percent to 55 million metric tons (mt).
In Indian markets, too, spot prices and aluminum futures have shown progress. Aluminum futures were trading a tad bit higher in the last few days, except for brief hiccups, as players enlarged their positions following the firming up of prices in the spot market on rising demand.
For Indian aluminum producers, news of some positivity could not have come at a better time. With a new government in place and infrastructure, power and others sectors starting to show the first signs of picking up, they expect local demand to go up.
Analysts predict the nation’s aluminum capacity will rise to about 4.36 mt by the end of this fiscal year from 1.71 mt in 2012.
Already, large firms such as Sesa Sterlite Ltd. and Hindalco Industries Ltd. are expanding rapidly but were left wondering how to break into new markets to unload their products.
Seizing The R&D Opportunity
A report in LiveMint said the companies were stepping up their marketing and research and development efforts to enter new markets. Plus, they were also working with Indian government agencies and companies to find new uses for aluminum in the transport, agribusiness, defense and aerospace sectors.
Quoting Debu Bhattacharya, Managing Director of Hindalco, the report said the company had over 30 product and application development projects at various stages of innovation and development.
India has traditionally been a poor consumer of aluminum but things are expected to improve. Analysts, as well as world producers, believe that the demand from India and China will only increase. The latter already consumes a lot of the metal but India needs to go past its low per capita consumption of just 1.3 kg against 6.4 kg in Brazil and 12.4 kg in China to help its domestic producers. In both India and China many expect that the automobile sector will drive up aluminum demand. Thus, the marketing initiatives are aimed at penetrating local and even global markets.