Introduction The Aluminium Industry February 2018 Aluminium is the second most used metal in the world after steel and the third most available element in the earth constituting almost 7.3 per cent by mass. India has a production capacity of 4 million tonnes of primary aluminium and production in 2016-17 stood at 2.8 million tonnes. Indian manufacturers are the lowest cost producers of the base metal due to access to captive power, cheap labour and proximity to abundant supply of raw are material, i.e., bauxite. According to the USGS report India ranks 4th in terms of primary aluminium production. China continued to be the single largest producer of aluminium, contributing 54% of the total world production. China is also one to the major consumers of aluminium. World Primary Aluminium Production 2016 During 2016 global primary aluminium production was nearly 59 million tonnes, and China has contributed about 54%. India s contribution was around 5 per cent.
Bauxite is the basic raw material for manufacturing aluminium. India has abundant reserves of bauxite with a reserve base of over 2.20 billion tonnes and is a net exporter of bauxite in the world. While India consumes around 60-70 per cent of its bauxite mined and exports the remaining, during 2016-17, a sharp increase in domestic aluminium demand resulted in a drop in exports. India s bauxite production stood at 24.8million tonnes and its consumption stood at 24.5 million tonnes in 2016-17. Around 90% of bauxite exports are made to China. World Bauxite mine production in 2016 Source: CARE, USGS Production Process Bauxite is first processed to form Alumina or aluminium oxide, which is then converted into Aluminium. The aluminium production process can be categorized into upstream and downstream activities. The upstream process involves mining and refining while the downstream process involves smelting and casting & fabricating. Downstreamfabricated products consist of rods, sheets, extrusions and foils.
End Use Segment Transport Building & Constructi on Packaging Power End use segment Canstock Machinery & Equipmen t Consumer Durables Indian Scenario Primary domestic aluminium production is growing at a CAGR of 13 per cent since FY13 and stood at 2.8 million tonnes in FY17 while consumption is increasing by 3% over the same period and stood at 1.9 million tonnes in FY17. FY17 1.9 2.8 FY16 1.9 2.4 FY15 FY14 1.6 1.6 1.7 2 Consumption Production FY13 1.6 1.7 0 0.5 1 1.5 2 2.5 3 Production & Consumption Pattern (Mn tonnes)
Surplus is being exported mainly to South Korea (38 Per cent of total exports), Malaysia (14%), Mexico, Italy, Turkey, USA, Taiwan, Spain, Japan, Indonesia, Bangladesh, Singapore, Brazil and Netherlands Production capacities have been on a rise in order to meet the increasing domestic and to export the surplus stock to countries deficient of aluminium. Major Players: The Indian aluminium sector is characterised by large integrated players like Hindalco and National Aluminium Company (Nalco). and Bharat Aluminium (Balco), a subsidiary of Vedanta Resources. Significant Power Cost: Power is amongst the largest cost Primary Aluminium Capacity for FY17 Hindalco 1.3MT Vedanta 1.6MT * Nalco 0.42MT *FY18 capacity levels Source: Business Standard component in manufacturing of aluminium (30-35%), as the production involves electrolysis. Consequently, Domestic players rely on coal-fired captive plants for power and fuel requirements located in close vicinity of the aluminium plant. Aluminium Prices in tandem with the world: There is a positive correlation between the prices of domestic and international aluminium and the same is driven by the economic situation in China, as it is the major producer and consumer of aluminium. During FY16, aluminium prices were the lowest around the world (USD 1494/tonne) and had declined by 16% y-o-y, due to oversupply of Chinese aluminium driven by overcapacity. However, there a pick up in Chinese demand backed by stimulus measures coupled with positive sentiments in the US post elections due to expected boost in infrastructure which resulted in a rally in FY16-17. International and Domestic Aluminium Prices USD/tonne and Rs./tonne
Outlook Increasing demand across all the end use segments will result in a continued robust demand of Aluminium in the country. The following are the driving forces. o Steps taken by the government to boost industrial and infrastructural development o Fast pace growth in automobile sector and food packaging segment o Increasing consumer-centric demand due to rapid urbanization The global demand for primary aluminium is also expected to be robust. China, despite slowdown in the demand, will continue to be the major driver The aluminium consumption pattern in China is expected to shift from infrastructure and power to packaging and automobile following the Chinese government's growth balancing efforts with increased thrust on consumer driven growth. The US demand is expected to remain strong growing at a CAGR of 4-5% over the next few years, as the housing recovery gains traction, car sales continue to improve and aluminium demand benefits from its new applications, particularly in the automotive sector. Western Europe is expected to grow moderately amidst economic uncertainty. The aluminium demand is expected to grow around 2.5%. Asia and Middle East are expected to register around. 5-6% growth in consumption on a relatively smaller base. Aluminium prices will experience an upward trajectory due to pick up in demand from the European markets as well.
Challenges faced by major players and our offerings The increasing demand and fast pace growth poses aluminium players with a number of challenges Increasing Costs: The external environment is volatile. Market prices keep fluctuating. In such a scenario cost optimisation techniques help you identify scope for reducing costs and bring about stability in operating profitability. Our solution: NMS brings with itself a rich experience of over 65 years in costing. Our services support you to identify your key cost drivers, and provide strategic options to control costs. We also provide capacity assessment which helps you to identify bottlenecks and scope for enhancement. NMS s wide range of offerings in this segment include - Costing templates - Benchmarking - Capacity assessment - Strategic offerings - Action plans Information Management: Information management is critical for any company s sustainable growth and profitability. Real time information is required on performance metrics, financial ratios profit and loss summaries across all departments, products and geographies. The right information at the right time is what allows agile, strategic decision-making, accurate forecasting, and management control of processes and supply chains. Our Solution: NMS provides a complete, integrated set of solutions that provide information that is accurate, complete, and timely. It helps connecting and automating the entire flow of business processes across both front and back office operations and throughout geographies, so the business runs at peak efficiency, worldwide. We provide - Information system assessment - ERP Evaluation & ERP Implementation Support Human Resource management: Growing business needs require efficient and skilled manpower. Besides an efficient human resource system in any organisation facilitates employee development and motivation which in turn helps in achieving organisational goals. Our solution: NMS offers a diverse range of cost effective and result oriented services for your human resource systems. Our services help your organisation s manpower to be ever ready to perform optimally in a fast changing environment. We offer the following services - Process study/set up/enhancement - Designing and implementation of training methodologies - Facilitating employee engagement programs High energy cost: Power cost makes up for 30-35% of total aluminium cost. Thus energy management is critical for players in this industry. It is necessary to identify and control areas to minimize your energy consumption to improve overall sustainability and competitiveness of your plant.
Our solution: Our solution helps you to identify and control areas to improve energy efficiency and business performance. Our services include - Energy Evaluation - Energy measurement analysis - Action plan Meeting government compliances: The policy and regulatory framework on the Indian Aluminium Industry entails a number of statutory compliance requirements. Our Solution: Our compliance management arm, assists you to meet your government and process compliances with ease. We also offer GST Compliance Management & ASP Rating Advisory: A credit rating from an external credit rating agency is mandatory for availing bank debt. Besides, a fair rating can help you reduce your cost of borrowings. Our Solution: At NMS we offer you a one stop solution for helping you carry out the rating process. Our services - Showcases the company s business to the rating agency in the right perspective - Guide you possible rating implications in case of any corporate actions such as Capex plans, growth plans and their funding pattern - Irons out any data asymmetry and communication gap between the your company and rating agency. - Releases your company of valuable bandwidth by providing a dedicated rating desk to meet all its rating requirements Source WorldAluminium.org CARE ratings report CMIE USGS Company Annual reports News Articales