Facing the double whammy of plummeting prices and subdued capacity utilisation, the domestic aluminum industry on Thursday hinted at resorting to production cuts and retrenchment if the government does not raise import duty to 10% immediately from 5% to protect the home turf from rising imports.
“The domestic aluminium industry is bleeding. All producers are running at an EBITDA loss. We are at a situation where the more we produce, the more we incur losses. Though we have not resorted to any production cut so far, if this situation continues for some more time, we would not have any option left which may also lead to job cuts,” said Abhijit Pati, a member of the governing council of Aluminium Association of India (AAI), said.
The industry employs 7.5 lakh people directly and indirectly. An AAI delegation is scheduled to meet on Friday Prime Minister’s principal secretary Nripendra Misra to press for immediate government intervention.
“Today, our cost of production is around $1,800 per tonne while the market price is just around $1,640. This is resulting in a loss of $160 for every tonne of our produce. This is unsustainable and requires government help,” Pati, who is also CEO of Vedanta’s Aluminium business, added.
A rise in import duty would at least stabilise the domestic prices and help the industry not to go for production cut immediately, he said.
Imports are accounting for more than 56% of the country’s total demand which now stands at around 2.5 MT. The Indian aluminium industry has around 4.5 MTPA installed capacity. Nalco in the public sector is another strong player in the industry. The share of the domestic auminium Industry production in domestic consumption has reduced to 44% in FY’15 from 66% seven years back.
Imports have grown from 8.81 lakh tons in FY’11 to 15.63 lakh tonnes in FY’15 at a CAGR of 16% mainly from China and Middle East, whereas Indian aluminium producers sale in domestic market has witnessed a de-growth at CAGR of 1% from 13.2 lakh MT to 12.7 lakh MT resulting in surplus availability of 8 lakh tonne.