Icra predicts 8% growth in aluminium demand

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New Delhi, May16: Though the country’s current per capita consumption of aluminium was 0.6 kg per annum, way behind China (2.9 kg), yet the domestic consumption of the metal is expected to grow between 6 to 8% annually, credit rating agency Icra has said.

The growth would be driven by increase in demand by power, automotive, construction, consumer durables and packaging sectors, the agency said. It pointed out that the electricity sector was currently characterised by shortages and demand was expected to increase over the medium to long-term necessitating significant increases in capacities.

It said restructuring of state electricity boards and implementation of the Electricity Act would open up new opportunities in power generation, transmission and supply. The forecast requirement of 1,00,000 mw of additional generational capacities in the 10th Plan period is likely to translate into new investment in power generation and distribution.

The rating agency pointed out that easy availability of low cost finance with longer tenures, price cuts on the strength of reduction in peak rates of customs duty and improved rural demand owing to recovery in the agriculture sector are expected to continue propelling growth of aluminium in the automotive sector.

Besides, housing demand is expected to remain robust because of enabling factors such as tax relief against interest cost on housing finance, competitive interest rates and availability of housing finance for duration as long as 30 years.

Moreover, the growth of consumer durables market has made the acquisition of durables more convenient and this has been a major demand driver, Icra said.

Finally, the packaging sector was expected to grow with the GDP expected to report a healthy growth in the immediate to medium term and consumer spending on foods and beverages likely to increase, resulting in positive implications leading to a corresponding rise in demand for aluminium, it said.

The agency reminded that the domestic demand had increased to a compounded annual growth rate (CAGR) of 6% during fiscal 2000 and 2004. While the growth in demand on year-on-year basis was low during fiscal 2001 and 2002, it picked up after fiscal 2003.