The Federation of Indian Mineral Industries (FIMI) said that international aluminium prices have surged past $3,400 per tonne amid fears of supply disruptions from the West Asia crisis, offering short-term gains to Indian primary producers but posing long-term challenges due to rising input costs.
Some aluminium smelters in the Middle East have declared force majeure and temporarily halted shipments, while the Qatalum smelter in Qatar has declared a restricted shutdown. FIMI said that the region accounts for nearly 8-9 per cent of global aluminium production.
FIMI official said that for India, the price rise is positive in the short term for primary producers, but cautioned that disruptions in the Strait of Hormuz have sharply increased freight costs, affecting imports of key raw material, Calcined Petroleum Coke (CPC), and elevating production costs for domestic smelters.
Companies at risk
Companies like Nalco, Hindalco, and Vedanta, which produce over 4 million tonnes of aluminium annually, rely heavily on CPC imports from the US and the Middle East, exposing them to supply chain vulnerabilities.
FIMI warned that if the crisis persists alongside high aluminium prices, it could curb domestic demand in downstream sectors such as infrastructure, power, consumer durables, and automobiles, where aluminium consumption is projected to rise by 8-10 per cent annually under the Atmanirbhar Bharat initiatives.
Industry calls for diversification measures
The industry body called for government measures such as diversifying import sources and reducing import duties on raw materials amid ongoing geopolitical tensions, the official added.
Vedanta is investing nearly Rs 10,000 crore to expand its aluminium business, including value-added capacity at Jharsuguda in Odisha, expansion at the Balco smelter in Chhattisgarh, and ongoing capacity expansion at Lanjigarh.
Nalco has lined up an investment of Rs 30,000 crore to set up a new aluminium smelter and a coal-based power plant over the next five years. Out of this, Rs 18,000 crore has been earmarked for the smelter, and Rs 12,000 crore will be spent on the thermal power plant.