By Sohrab Darabshaw
Indian exports of aluminum have been on the rise for some time now, since local use has fallen because of the slow economy prior to the election of the new Modi government last May.
Aluminum from Hindalco's (OTC:HNDNF) Mahan unit in Madhya Pradesh province is being shipped to Japan and South Korea, the US, and some African nations too. A surge in demand for aluminum by the automobile industry and for use in can sheets were said to be the main drivers of the exports.
Strong Export Demand
India was already a net exporter of aluminum even before this surge happened.
The country has a smelting capacity of over 36 million metric tons. Last year, its manufacturers produced about 28 million mt of the metal, while this year, analysts say, the figure could go even higher. However, with Chinese imports affecting domestic consumption, the question on everyone's mind is - "Who's buying?"
New capacity is being added in the face of slow growth in domestic demand. Chinese producers are simply undercutting local prices.
Chinese Imports Not Stopping Production
Some Indian aluminum producers remain undaunted by the imports. One such optimistic person is Debu Bhattacharya, managing director, Hindalco, who told the Hindustan Times recently that the phenomenon of Chinese goods coming into the Indian market would be "short-lived." He said aluminum's wide applications would ensure a strong outlook for the metal in the coming months.
Hindalco is one of India's largest aluminum producers, and has posted aluminum sales growth of 14% on the fiscal year that ended in March 2015 due to higher production at its two new smelters - Mahan Aluminum and Aditya Aluminum.
Independent research agency CRU too seems to be on the side of Indian producers. It said in a recent forecast that aluminum production would rise throughout this year, despite the announced closure of Alcoa (NYSE:AA)-BHP Billiton's (NYSE:BHP) Sao Luis plant in Brazil. The global production estimate for Indian aluminum is high, betting on the two Hindalco smelters and Balco's Korba plant all seeing production rise this year.