Aluminium production, as well as consumption in the country, has been increasing over the last few years at a healthy rate. However, while an increasing proportion of aluminium demand in the country is being met from the secondary (recycled) route from imported scrap, a large proportion of the metal manufactured by the primary 2 players are being exported from the country. Utilization of aluminium through the primary and secondary routes follows two distinctively different patterns. While more than 50% of the aluminium is consumed by the power transmission and distribution sector through the primary route, most of the aluminium through the secondary route finds application in the automobile industry.
As against the automobile industry in total over 42% of the aluminium in India continues to be consumed by the Transmission and Distribution sector, sharing the largest proportion of aluminium consumption in the global market. As on date, 25% of domestic aluminium is consumed by the automobile industry. In the near future, the automobile sector is likely to emerge as one of the prime drivers of aluminium demand in India, as the sector grows and the usage of aluminium in automobiles goes up in line with global trends.
Investment Information and Credit Rating Agency (ICRA) estimates that almost the entire quantity of scrap required for manufacturing aluminium through the secondary route is imported due to the unavailability of aluminium scrap in India. Collection of various kinds of scrap in India is undertaken by the unorganized players, with a nominal amount out of that being usable by the aluminium industry. On the other hand, most of the recycled aluminium is employed by the auto industry, which specific auto-grade needs scrap.
A large proportion of aluminium in the automobile industry is consumed in the form of various alloys. In the domestic market, as on date, the primary producers have restricted capacity to manufacture automobile grade alloyed aluminium products, resulting in a restricted amount of aluminium alloys being manufactured through the first route.
Going forward, as demand for auto-grade aluminium will increase; import of aluminium scrap into India might increase unless domestic primary alloying capability is increased in tandem with the rise in demand for such products. Moreover, the development of products for the auto-industry and securing client approval is a long method. Hence, import of auto-grade aluminium scrap vis-a-vis export of unalloyed primary grade aluminium from the country would stay high, at least in the near to medium term.