Sector at a Glance - Aluminium Industry

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Table of Contents

1. Overview of Aluminium Industry.....................................................................3

2. Global aluminium industry structure................................................................4
3. Aluminium and India....................................................................................5
4. Utility of Aluminium....................................................................................6
5. Aluminium Usage in Various Sectors in India......................................................10

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1. Overview of Aluminium Industry

Aluminium is the most abundant metallic element in the earth's crust and the most widely used
non-ferrous metal. It is highly reactive and does not occur in free metallic form in nature but its
compounds are present in almost all rocks, vegetation, and animals. It is the second most used
metal in the world after steel with an annual consumption of 88 Million Tonnes (including scrap).
It is also the fastest growing metal which has grown by nearly 20 times in the last sixty years
(compared to 6 to 7 times for other metals). Some of its unique properties like lightweight,
recyclability, conductivity, non- corrosiveness and durability have helped establish it as a metal
of choice for various applications across various segments of the manufacturing sector. Aluminium
is also called ‘the Metal of Future’ due to the above properties. Being lighter (3 times lighter than
steel), it aids in fuel efficiency making it an efficient choice for automotive, defence and
aviation. The construction industry relies on a variety of aluminium alloys in the manufacture of
products ranging from exterior siding to structural components due to its durability and non-
corrosive properties. Its ability to conduct heat and electricity also makes aluminium a popular
choice in the electrical and electronics industries. Coupled with infinitely recyclable properties,
aluminium is a convenient option for packaging industry such as beverage cans and foils.

The production of primary aluminium metal commences with bauxite ore, which is composed of
hydrated aluminium oxide (40%-60%). Roughly 4 to 5 tons of bauxite ore are refined to produce
approximately 2 tons of alumina. This 2 tons of alumina is smelted to produce approximately 1
ton of aluminium. Both in terms of quantity or value, the global use of aluminium exceeds that of
all other metals except iron. It is important in virtually all segments of the global economy. Very
few metals exhibit the unique combination of properties that enable aluminium to be used in
practically all design and product applications. 

Pure aluminium (99.996%) is relatively soft and weak. Commercial aluminium (99.0-99.6% pure)
with small amounts of silicon and iron is hard and strong. Aluminium is added in small amounts to
certain metals to improve their properties for specific uses, as in aluminium bronzes and most
magnesium-base alloys. Otherwise, moderate amounts of other metals and silicon are added to
aluminium for aluminium-base alloys.

Various aluminium alloys have different properties. Consequently, aluminium is used in industries

as diverse as transport, food preparation, energy generation, packaging, architecture, and
electrical transmission applications. Globally, auto & transport account for 23% of aluminium
consumption, followed by construction (22%), packaging (13%), electrical (12%), machinery and
equipment (8.5%), consumer durables (4.5%), and other segments (4%).

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2. Global aluminium industry structure

The aluminium industry comprises two basic segments: upstream, and downstream. The upstream
sector produces primary aluminium from raw materials and involves bauxite mining. After
extraction, bauxite is processed into alumina. The alumina is transformed into primary aluminium
through a process called smelting. Primary aluminium is the starting block for aluminium products
and is mainly in the form of ingots and billets. Production of primary aluminium is a capital and
energy intensive process and thus major players in this segment are large players. Major global
players in the primary aluminium industry are Hongqiao, Rusal, Rio Tinto, Shandong and Chalco.

The processing of aluminium into semi-finished aluminium goods such as rods, bars, rolled
products, castings, forgings and extrusions comprises the downstream segment of the industry.
These aluminium products can be manufactured using primary or secondary aluminium, or a
combination of both depending on the specification of the final product. Aluminium production
from recycled scrap is secondary production. Extrusion products are mainly used in building and
construction sector (B&C) in the form of windows, doors, curtain walls and formwork, bathroom
and kitchen applications etc. B&C accounts for almost 62% of extrusion consumption. Automotive
sector also uses extrusion products for light weighting of vehicles in the form of extruded tubes,
multi-hole profiles, door beam, bumper system etc. Both developing and developed countries are
increasingly using them for the purpose of urbanization and the need for sustainable buildings
respectively. The transport sector accounts for almost 14% of demand, primarily driven by light
weighting of vehicles (aids in fuel efficiency). China is the biggest consumer of extrusion products
accounting for almost 63% of global consumption.

Since 2000, there has been a gradual shift of primary aluminium production centres from west to
east largely from North America to China, India and Middle East. China dominates production as
well as consumption of aluminium accounting for nearly half of the global production and
consumption. China, Russia, Canada, India, UAE, Australia and Norway together account for 80%
of the global primary aluminium production.

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3. Aluminium and India

Aluminium Consumption in India at 2.5 kg per capita is much below the global average of 11kg per
capita. To reach the global average of 11 kg per capita, India will require an additional annual
consumption of 16mn tonnes, thus, making it the second largest consumer in the world. Even at
low consumption, aluminium contributes 2% of manufacturing GDP (steel 12%, cement 9%) and
this is expected to move up with consumption growth. This growth is critical for India’s industrial
vision of achieving 25% of GDP from manufacturing by 2022. Studies document Aluminium
industry’s forward and backward linkages are greater than 1. By speeding up investment in
sectors with high backward and forward multipliers, the industrialization process can be speeded
up accelerating economic growth. The industry also has a high direct and an indirect employment
multiplier creating close to 800,000 jobs. Plants are generally based in the hinterlands of the
country and aid in generating peripheral employment and development of the region.

India is the 4th largest Alumina Producer, 3rd largest Aluminium Producer and 5th largest
consumer of Aluminium. It is endowed with rich and good quality coal and bauxite reserves (5th
largest in the world for both). India’s unique advantage of abundant, good quality bauxite
(compared to China which has high silica content) along with coal, which needs to be leveraged
to develop a globally competitive aluminium industry which will also help achieve our economic
development goals. India has a significant primary aluminium capacity (4100KT) and downstream
processing capacity (3880KT) which lays a good platform for scaling up and leveraging our natural
resources.

Going forward the sector will be a key contributor to the government’s key flagship programs like
Make in India, National Capital Goods Policy, Development of 100 smart cities and government’s
commitment to reach a 100 GW solar capacity by 2022 from 20 GW today. Some of the ways it
can contribute to key sectors in India are by enhancing fuel and cost efficiency in railways,
commitment to CO2 emission norms and adoption of EV’s in the transport sector, target to
increase renewable energy share to 40% and even more by 2030, indigenously designed defence
equipment, increasing indigenisation of aerospace and aviation sector and increasing footprint in
consumer durable and packaging sector as a result of growing urbanisation. Being light-weight,
good conductor of electricity, non- corrosive in nature, durable, infinitely recyclable and the fact
that it can aid in fuel efficiency makes it usable across various critical segments of the
manufacturing and shipping sector.

Given our competitive advantage in terms of natural resources, capacity can be increased
multifold to cater to domestic demand without any reliance on imports.

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4. Utility of Aluminium

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 4.1. Global - Auto, construction major users of aluminium globally

Globally, the automobile and

construction sectors account for
about 25% each, of the total
aluminium consumed. The automobile
manufacturers globally opt for
aluminium as it improves fuel
efficiency, reduces emission and
enhances the vehicle's performance.
Aluminium is used in the real estate
sector for window panes and
door frames. The power sector
accounts for only 11% of total

Low per capita income, cheaper substitutes also aluminium consumed globally. This is

determine global consumption pattern because, in most developed

economies, power is transmitted
End-user consumption of aluminium can also depend on a
through underground cables that
country's per capita income, availability of cheaper
largely use copper. Copper is mainly
substitutes and economic growth. Strict environment
used in underground cables
policies, energy efficiencies, globalisation and continuous
(operating at higher voltages of 400
development of new applications can increase the use of
kV) because of its higher thermal and
aluminium in many developing countries. On the other
electrical conductivity which helps to
hand, substitution of aluminium with cheaper plastic or
conserve space, minimize power loss
other materials, and policies favouring growth instead of
As of 2016, global per capita
sustainable development can act as a barrier in the end-
consumption of aluminium varied
use consumption growth of aluminium. For instance, in
between 5-10 kg. In India, it is 1.5
certain applications in sectors such as construction,
kg. By contrast, China, the single-
transport and packaging, plastic and steel composites can
largest consumer of aluminium, uses
substitute aluminium.
15.4 kg per capita

Peer comparison of aluminium

consumption patterns (2018)

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 4.2. India - Power sector, major aluminium consumer in India

In contrast to the global trend, in India, the power sector accounts for about 56% of total

aluminium consumption, as the metal is a cheaper substitute for copper and also has lower
weight. In India, power is supplied through grids that comprise transmission towers, in which the
overhead conductors are mainly made of aluminium. Aluminium is used in overhead conductors
due to better strength-to-weight ratio, and lower weight and price as compared to copper.

India: End-user consumption (2018-19)

Use of recycled aluminium on the rise in India

Better cost dynamics of recycled aluminium has led to surge in its share in aggregate aluminium
consumption in India. In the three years through fiscal 2019, usage of primary aluminium logged a
compound annual growth rate of 3.5-4%, while that of recycled aluminium zoomed at a robust 17-
18%. As a result, the share of recycled aluminium in aggregate aluminium market in India stood at
34% as of fiscal 2019, up 800 basis points (bps) from 26% three years ago. This is in line with the
global trend, though the proportion is much lower compared with developed economies.
Fuelling this growth is the better cost economics recycled aluminium offers. For instance, the
ADC-12 alloy manufactured using recycled aluminium is 15-20% cheaper than that made with
primary aluminium. Added to this, there is healthy demand for non-ferrous castings from the
automotive sector, which consumes ~65% of recycled aluminium in India. Further, demand from
the building & construction sector, which consumes 10-15% of overall recycled aluminium, has
also increased with rising penetration of recycled extrusions, especially in window frames. In
India, over 1.34 million tonnes of aluminium are recycled annually from scrap. It constitutes 33-
35% of total aluminium consumption (primary and secondary aluminium).

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5. Aluminium Usage in Various Sectors in India
Railways - Rs.8.5 Lakh Crores committed over the 5-year period with focus on:

 Enhancing safety of passenger cars

 Increasing speed of the trains
 Driving Energy and Cost Efficiency

Transport

 Stringent CO2 emission norms

 Faster Adoption & Manufacturing of Hybrid / Electric Vehicles (FAME Scheme)
 Enhanced safety features thru Crash Management System (50% of PVs by 2022), Under
Body Protection (CVs)
 Switch to Automatic Transmission (AT cars share from 7% to 30%)

Power/Solar

 Target to increase renewable energy share to 40% by 2030 (33% currently)

 Solar capacity increase from ~3 GW to 20 GW in last 4 years
 Target to increase Solar capacity to 100 GW by 2022

Defence

 5th largest defence spending ($64 Billion, 13% YoY growth*)

 Largest importer of defence equipment
 Institutionalization of Make In India, DPP (Defence Procurement Procedure), IDDM
(Indigenously designed, Developed & Manufactured) and ToT (Transfer of Technology)

Consumer Durable / Packaging

 Increasing urbanization: urban population share set to cross 50% by 2039 (33% currently)
 Rising per capita consumption
 Environment and Health centric regulations to eliminate plastic usage in packaging-
Aluminium green and healthy substitute

Aerospace & Civil Aviation

 Increasing indigenization by ISRO

 India’s civil aviation market expected to be 3rd largest by 2020
 Demand boost through offset obligations – Boeing, Airbus, Dassault expected to spend $14
billion by 2028

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Aluminium and its role in SDG goals - India’s COP-21 commitments to reduce the emissions
intensity of its GDP by 33-35% by 2030 from 2005 level will be aided by

 Light weighting of vehicles leading to increased fuel efficiency

 Replacing plastic with aluminium cans to reduce GHG emission
 Promoting use of electric cars
 Reducing usage of wood in construction sector
 Aluminium will also play a critical role in investment in renewable energy like wind, solar
and energy storage batteries as mentioned earlier

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SHIPPING SERVICES OVERVIEW

 Shipping has long been the major form of transportation, as well as an essential communication link
connecting coastal cities, countries and continents.

 Water transportation is economically and environmentally the most efficient way to travel or transport
merchandise; and, nowadays, around 90% of world trade is carried by the international shipping industry.

 The shipping sector has experienced a significant qualitative and quantitative expansion with the
development of two new industrial growth poles: the offshore oil exploration and production industry, and
the cruise sector.

 The shipping sector is composed of organizations and activities such as- - shipping transportation - the
naval industry (naval engineering and shipbuilding companies) - commercial fishing and aquaculture
industry, the cruise and recreational sector, sport and commercial ports and marinas, marine energy
sources, navies, marine and ocean research and sciences.

Shipping operations: Shipping operations are broadly divided into two categories

 Deep-sea shipping which caters to transportation goods between regions and continents. This requires
large vessels moving huge volume of goods across continents. The only competing mode of transport is
airways which is not cost efficient.

 Short-sea shipping which caters to transportation of goods within the region. This mainly entails moving
goods within a specific region or short routes within a country.

 There are no direct competitors of deep sea shipping but short-sea shipping competes with other modes
of transport like rail and road.

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Vessels are also broadly classified on the basis of the type of cargo carried by them. They are as follows:

 India is the sixteenth largest shipping country in the world, with a coastline of about 7,517 km.

 India has 13 major and 205 notified minor and intermediate ports. Jawaharlal Nehru Port Trust is the
largest major port in India, while Mudra is the largest private port.

 The Indian shipping industry plays an important role in the Indian economy as almost 90% of the country’s
international trade is conducted by the sea. India has around 1071 ships with 722 coastal and 349 overseas
ships as on FY19 as per SCI.

 The major ports had a capacity of 1,514.09 MT per annum (MTPA) by FY19.

 Turnaround time at major ports in India has decreased at a rapid pace from 82.32 hours in FY17 to 64.69
hours in FY20 (till September 2019).

 The major ports in India are overseen by the Port Trust Boards and are regulated by the Tariff Authority for
Maritime Ports (TAMP). Minor ports are overseen by the state governments.

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