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Future Good For Aluminum?

Monday, August 29, 2011

Is Head, Trade and Commodity Intelligence Group, National Collateral Management Services Ltd.

Aluminium has emerged as a very, useful metal, because of its light weight, good physical properties like tensile strength, non-rusting, minimum
maintenance and good conductivity. In the pre-independence era, we had ordnance factories and Indian Aluminium Extrusion plants.

In the early 90's we started manufacturing the extrusion equipments indigenously. The presses were of 600 to 900 tonnes capacity. The infrastructural changes in the country like coming up of malls and high rise commercial as well as residential  buildings, increase in defense and railway requirements has lead to an increase in demand for heavy equipments, therefore 2500 to 6500 tonnes capacity extrusion plants have been installed in the recent past.

A very important section of the Aluminium industry is that of die-casting. The growth has been phenomenal in the country as the automobile industry is growing leaps and bounds. The industry catered to the fledgling auto industry and the electric fan industry ranging in capacity from 80 tonnes to 3,200 tonnes of locking force. India produces around 1.1 million tonnes of aluminium today. The Indian industry consumes around 0.45 million tons of castings of which 60 per cent (0.25 million tons) is die-casting.

In India the usage of aluminium in cars currently is 75 kg per car in the passenger segment. The world average is 125 kg and is expected to go up to 150 kg in the near future. This shows the scope of increase in the die-castings in the near future for use in the Indian automobile industry.

Areas like construction and packaging where global aluminium consumption thrives, has low relevance to India. Barely 6 per cent of the aluminium finds its way in the construction industry compared with 17 per cent in USA and 25 per cent in Japan. The Indian construction industry, which is headed for promising growth, can, therefore, be a major demand driver. Moreover, our per capita consumption  of aluminium is 1.3 kg, whereas china is consuming7kg and the world average is around 25 kg. Aluminium stocks have fell continuously to 203,777 tonnes as of July 22, down 58.7 per cent from 492,811 tonnes in early November 2010.

China's aluminium product exports are soaring and primary aluminium imports are just ‘a drop in the  aluminium ocean’ while raw materials purchasing patterns are shifting away from alumina. The Japanese government has so far failed to provide a clear picture for what the nation's energy policy should be, in the aftermath of the March 11 earthquake and tsunami which crippled a huge nuclear plant complex and triggered the world's worst nuclear accident in 25 years. All these fact are adding to the uncertainties in the market. The base metals have been marred by down grading of the US Economy.

In spite of the current uncertainties, the future of aluminium continues to be bright. The reemergence  of global demand, especially from Japan, US and EU is expected to support the price in the third quarter of 2011. For the coming 2-3 weeks  aluminum trade is likely to be volatile with a bullish undertone. In the Indian futures market the market is expected to find very strong support at 103.30 and has good potential to breach 122.60 levels on the higher side. The support for this
uptrend is likely to come from Chinese and European Union buying.

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