NEED FOR ALUMINIUM

POLICY IN INDIA
ANKIT KAPREE – ISB&M, 2021
  OVERVIEW OF THE ALUMINUM INDUSTRY
 KEY HIGHLIGHTS
 GLOBAL ALUMINUM STRUCTURE
 ALUMINUM AS A STRATEGIC SECTOR
 STRATEGIC USES OF ALUMINUM
 ALUMINUM CONSUMPTION VS GDP
INDEX  ALUMINUM IN INDIA
 USAGE IN SECTORS
 NEED FOR GOVERNMENT INVOLVEMENT
 PRIMARY METAL AND DOWNSTREAM CAPACITY
 SELF SUFFICIENCY IN ALUMINUM – CHINA VS US
 CHINA’S INCREASE IN PRODUCTION
 CAPTIVE POWER COSTS
 ISSUES PLAGUING ALUMINUM IN INDIA
 ISSUES
 VISION FOR NEW ALUMINUM POLICY
 GLOBAL IMPORTED SCRAP SCENARIO
 SUGGESTED RECOMMENDATIONS

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 OVERVIEW OF
THE ALUMINUM
INDUSTRY

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KEY HIGHLIGHTS:

o Fastest growing metal

o 2nd most used metal in the world after steel Global Aluminum Consumption (%)
4.5 4
8.5 23
o Annual global consumption of 88mn tonnes

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The aluminum industry comprises two basic segments:
o Upstream
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• produces primary or “unwrought” aluminum from
raw materials and involves bauxite mining.
Auto & Transport Construction Packaging Electrical
o Downstream Machine & Equipments Consumer Durables Other Segments

• processing of aluminum into semi-finished

aluminum goods such as rods, bars, etc.

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 GLOBAL ALUMINUM STRUCTURE

PRODUCTION (UPSTREAM) CONSUMPTION (DOWNSTREAM)

PRODUCTION (MTPA) CONSUMPTION (MTPA)
5.2 8.1
1.8 1.7
2.9
3.2
3.5
3.3
3.6
41.5
3.7
12.6
36.3
4.4

5.6 13.8

China Europe North America

China Middle East Europe Russia Japan India Middle East
India Canada Australia ROW South Korea ROW

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 ALUMINIUM AS
A STRATEGIC
SECTOR

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 S R AT EG I C U S ES O F A LU M I N U M :

Key for Industrial Growth – Metal of the Future

Aluminum for low Carbon Future

Sector with strong backward and forward linkages

Critical for Defense Industry

Equitable Growth

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ALUMINUM CONSUMPTION
V/ S G D P ( P E R C A P I TA )

• Aluminum is one of the most critical metals

• It has been seen that the consumption of

aluminum increases with the increase in GDP

• Indian per capita consumption is very low at

2.5kg as compared to global average of 11kg CHINA ALUMINUM CONSUMPTION

• China on the other hand, has been a major

contributor to aluminum exchange with a per
capita consumption of 24kg

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 ALUMINUM
AND INDIA

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o Even at low consumption, aluminum contributes to 2%
USAGE IN SECTORS:
of manufacturing GDP
Railways

o This industry also has a high direct or indirect

Transport
employment multiplier
Power / Solar
o India’s consumption of aluminum is 2.5kg as compared
to the global average of 11kg per capita Defense

o To match the global average, India will need to consume

Consumer durable / Packaging
an additional 16mn tonnes
Aerospace and Civil Aviation
o This growth is critical for India’s industrial vision of
achieving 25% of GDP from manufacturing by 2022 SDG Goals

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 THE NEED FOR GOVERNMENT INVOLVEMENT
High Growth Potential : Competitive Advantage :

Consumption Position
• Still very low at 2.5kg per capita • India is world’s 4th largest alumina producer, 3rd largest
aluminum producer and 5th largest consumer
Concentration
• Highly concentrated in electrical industry segment
Concentration
(43%) • 5th largest reserves for good quality coal and bauxite

Share Capacity
• Transport and consumer durables account for 15% and • India has a significant primary aluminum capacity of
19% respectively 41000KT
• India has a significant downstream capacity of 3880KT
Opportunity
• Strong correlation required for combined growth in Opportunity
various segments • All of these lay a good platform for scaling up and
leveraging the natural resources

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 PRIMARY METAL AND DOWNSTREAM CAPACITY

India Production and Consumption of Aluminum, MT

4
3.5 3.2 3.3 3.3 3.5
3 2.7 2.6 2.8 2.7
2.4 2.4 Production
2.5 2.1 Consumption
1.7 1.7 1.8 1.7 1.7 1.7 1.9
2 1.5 1.6
1.5 1.2 1.3
1
0.5
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

o This sector is characterized by fully integrated to product specialists

o It may be vertically or horizontally extended
o The upstream sector is capital intensive is dominated by three major players - NALCO (PSU), Hindalco and Vedanta with
a production of about 3.5 MT and capacity of 4.1MT
o The downstream segment comprises 150+ large & mid-sized companies and a much larger base of smaller &
unorganized players

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 SELF SUFFICIENCY
IN ALUMINUM –
CHINA VS US

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 CHINA’S INCREASE IN PRODUCTION

• China recognized the importance of owning strategic metals

FIRST • Leveraged natural resource advantage and link between strong metal sector and export-led strategy

• Its industrial cluster development philosophy for the sector helped it relatively backward regions of the
SECOND country

• It focused on value addition by supporting the downstream sector in product development and capacity
THIRD creation

• Strong policy interventions / support to the pillar promoted domestic demand for the metal
FOURTH

The result of this strategy was that China became self-sufficient in aluminum production and a global supplier.

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 o The biggest incentive for the Chinese aluminum sector is its
CAPTIVE POWER COSTS lower cost of power as a result of coal subsidies and cheaper
grid tariffs provided by various provincial governments.

o On the other hand, Us has had a completely opposite

aluminum journey. China’s excess aluminum capacity
resulted in weakening of US aluminum industry. In 2016, the
U.S. imported more than 90 percent of the primary
aluminum it consumed.

o China’s export rebates to their downstream industry have

also led to flooding of imports in the downstream industry
which provides supplies to their defense and critical
infrastructure.

o These are important cross-country learnings for India’s

growing Aluminum Industry.

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 ISSUES PLAGUING
ALUMINUM IN
INDIA

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 ISSUES
• India has the highest power costs. Domestic aluminum industry has struggled due to further rise in costs
ENERGY • Additional burden of RPO, coal cess, PAT and electricity duty on power generation have increase the cost of production
• Differential electricity duty for captive and IPP power

• Delays in grants, land acquisition issues, lack of availability and allocation

MINING • Absence of proper connectivity and infrastructure
• Procedural issues between Centre, State and bidders

• Increased cost of transportation and poor connectivity

INFRASTRUCTURE • Costly infrastructure for disposal of Fly-Ash and Red Mud
• Poor rake availability

LACK OF SCRAP • Absence of standardized and formalized scrap recycling policy

RECYCLING • Absence of organized metals recycling industry

• High tariff structure

TRADE POLICIES • Skewed duty structure
AND FTAs • Surge in import of aluminum items given preferential duty by India

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 VISION FOR A NEW
ALUMINUM POLICY

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 GLOBAL IMPORTED SCRAP SCENARIO

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 SUGGESTED RECOMMENDATIONS

• The National Aluminum Policy (NAP) Reforms in

coal and
needs to focus on a holistic short-term, bauxite mining
medium and long-term vision by
identifying growth targets for demand Infrastructural
augmentation and capacity addition. Metal and
and Database
Scrap recycling
issues
• This requires a strategy for achieving the
targets in terms of raw material, Aluminum as a
infrastructure, value-addition, power, core industry
energy requirements and scrap
recycling. Energy policy
Trade policy for energy-
and mega FTAs intensive
• NAP must address the issues that have sectors
constrained domestic industry Export policy
productivity and capacity augmentation. for
downstream
industry

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THANK YOU.

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