India poised to meet global aluminium demand

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: The domestic aluminium industry can be divided into two broad categories:

• Primary metal producers process bauxite into aluminium ingots, billets or properzi rods. Primary producers are generally integrated producers, engaged in the entire chain of activities from mining of bauxite to smelting of aluminium.

• Secondary fabrication units process aluminium into value-added aluminium products such as rolled products, extrusions, foils, bars & rods, wires, plates, sheets, etc rolled products, foils, sheets or extrusions.

Given that production of aluminium (the metal) is a more capital-intensive activity than fabrication, there are just five large ingot producers in India, as against several small downstream manufacturers. Despite being secondary products, rolled products are largely manufactured in the primary sector on account of the high capital costs involved in setting up cold/hot rolling mills. Since primary players produce aluminium at lower costs vis-à-vis the landed cost of imported aluminium that is used by most secondary players, the margins of primary producers increase if they undertake secondary processing themselves. The primary industry has thus started integrating downwards.

Primary metal producers

The primary aluminium industry in India is concentrated in three business groups i.e., the Aditya Birla Group, Sterlite Industries, and Public Sector Undertakings (PSUs). The five primary metal producers in the domestic aluminium industry are:

PSU: National Aluminium Company Limited (Nalco)

Aditya Birla Group: Hindalco Industries Limited (Hindalco), Indian Aluminium Company Limited (Indal).

In FY2000, Hindalco acquired a majority stake in Indian Aluminium Company Ltd (Indal), which had a major presence in downstream aluminium products.

Sterlite Industries: Bharat Aluminium Company Ltd (Balco), Madras Aluminium Company Ltd (Malco).

Secondary metal producers

Secondary rollers and extruders in the Indian aluminium industry either purchase the primary metal (billets and blooms) from domestic producers or import the same and process the metal at their own fabrication plants into semi- or fully fabricated products. Such secondary metal producers include India Foils, Pennar Aluminium, and Century Extrusions, which together control over 70% of the market for extrusions and foils.

The secondary metal (aluminium) industry in India is characterised by:

• Low entry barriers because of low capital costs and low dependence on technology. The low entry barriers imply keen competition and low capacity utilisation.