The downturn in aluminium sector due to overproduction and declining prices is ebbing with prices of the metal stabilising, indicating a revival in global commodities market, a senior government official said.
However, the official said India has to exhibit caution as there has been a significant rise in cheap imports lately that needs to be analysed before devising a strategy for the revival of the industry in the country.
This comes in the wake of aluminium prices appreciating at the London Metal Exchange (LME).
“International prices are looking up. Although they are still in the process of stabilising, but it gives a positive direction about revival of the commodities market in general and non-ferrous in particular,” Mines Ministry’s Economic Advisor Sudhaker Shukla told PTI.
Shukla added that with stabilisation of prices and changing demand scenario, the capacity utilisation in aluminium sector is bound to increase in the coming months.
“The downturn in aluminium has ebbed. Now prices are rising. If the demand in China also picks up further then this (price) will further strengthen,” Shukla said.
Aluminium prices have appreciated by 9 percent to $1,629.83 per tonne on an average in July at the LME as against $1,494.29 a tonne in December 2015.
In April, May and June this year, average prices of the metal stood at $1,524 a tonne, $1,556.33 and $1,592.2, respectively.
On the supply-demand side, data from Mines Ministry showed that in April-June, global consumption of aluminium was 15.43 million tonnes (MT) against a production of 14.47 MT, leaving the market with a deficit of almost 1 MT.
The Mines Ministry attributes the price rise to increasing demand, whereas the production of the metal remained at the same level.
Shukla, however cautioned over the rising aluminium imports in the last few months, which can impact the sales and profits of domestic producers.
“With rise in international prices, imports of aluminium have also shown a sudden jump in the last few months. This needs to be carefully analysed before going ahead with remedial steps for the complete revival of the aluminium sector,” he cautioned.
According to industry data, aluminium imports rose by 12 percent to 404 kilo tonnes (KT) during April-June as against 389 KT in the year-ago period.
The domestic primary producers have been lobbying with the government to initiate counter measures to check cheap imports from China and some countries in the Middle East.
Last week, industry body Aluminium Association of India met Finance Minister Arun Jaitley and pitched for protective measures against cheap imports. Top officials from Vedanta, Nalco, Hindalco and Balco also made a case for imposing Minimum Import Price (MIP) on aluminium products.
China, world’s largest producer and consumer of metals, is exporting surplus aluminium amid a weak domestic demand. Besides, the situation is alarming as 50 percent of the metal consumed in India is coming through imports, it said.