Aluminium being the second most used metal in the world has an approximate annual consumption of 88 million tonnes including scrap. Furthermore, it is also the most rapidly growing metal which has advanced by roughly about 20 times in the past 60 years. Since aluminium cannot be found in a pure form, it took around 100 years to start the commercial manufacturing of the metal. Aluminium as a metal has had a very outstanding journey from being a valuable metal to now a metal that is present across a multitude of sectors in our day-to-day lives. This reusable metal was termed as the ‘Choice of Presidents’ as many great world leaders chose to utilise aluminium in varied forms. In the current phase, the metal is at the core of our country’s infrastructural development and has found its way to supply to various industries like defence, automotive, energy, solar, packaging, and transportation at a domestic and global level as well.
Downstream and upstream aluminium domain
The aluminium domain encompasses two basic segments namely the upstream and the downstream aluminium. The upstream aluminium sector generates primary or unwrought aluminium from raw materials that include the mining of bauxite. After the process of extraction, bauxite into alumina; the alumina is transformed into primary aluminium through a process termed as smelting. Taking into consideration the process of aluminium manufacturing, the primary production is the method through which virgin aluminium gets composed as opposed to the secondary aluminium production, in which the prevalent metal is engineered to add value. The aluminium dispensation into aluminium goods like rods, bars, castings, forgings, rolled products and extrusions embrace the industries downstream sphere. These aluminium products can be contrived making use of primary or secondary aluminium, or an amalgamation of both based on the requirement of the final product.
In the building and construction division extrusion products are used in the form of doors, curtain walls, facades, windows, bathroom fittings to name a few. The automotive sector makes use of extrusion products for light-weighting of automobiles in the form of extruded tubes, door beams, multi-hole profiles, and bumper systems, brake systems amongst other applications. Both emerging and developed countries are progressively utilising them for development and the requirement for ecological buildings. The transport sector accounts for almost 14 % of demand, determined by the light-weighting of vehicles. The aluminium flat-rolled products (FRP) are the second-largest wrought aluminium product classification in the world post extrusions. FRP consists of products like auto body sheets, sheets/plates for aerospace and civil aviation, litho sheets, foils for packaging and pharma, etc. It has a wide range of utilisations in the automotive segment and the booming domain of building and construction.
The per capita consumption of aluminium is closely associated with the country’s GDP. It has largely been perceived that aluminium consumption has revived with a rise in per capita gross domestic product and industrialisation. For example, the highly developed countries like South Korea have recorded the highest per capita consumption of 46.7 kg, followed by Germany (29.9 kg), Japan (16 kg), and USA (18 kg). In India, the consumption of the metal is very low at 2.5 kg compared to the world average of 11 kg. The gap shows why aluminium is an important metal in the growth story of India.
Usage of aluminium in diverse sectors
The sphere of construction is largely dependent on aluminium as its major raw material. The metal has a fundamental role to play in transforming the image of urban towns and cities with the desire to develop skywards, and ecological compatibility of the modern-day megalopolises. The glass facades of commercial skyscrapers are fixed by lightweight and extremely robust frames composed of aluminium. Aluminium foam works due to its strength-to-weight ratio, firmness, and steadiness of aluminium frames, reflective properties and it is a non-combustible material are some of the reasons why it is widely used in building and constructions. Owing to its green and sustainable nature, energy-efficient properties, and low carbon footprint and the ability to recycle and reused, aluminium has now become a preferred material for developers, architects, and builders. The applications like windows, doors, facades, roofing systems, domed roofs ceilings, and air conditioning systems are built making use of aluminium structures. Properties of aluminium as a material have brought about various ground-breaking and radical transformations in building techniques, architectural, and engineering projects. Aluminium will be used in large quantities for smart city projects in various cities of India. Hence, the entire construction realm is tremendously dependent on this recyclable, corrosion-resistant, and durable metal.
THE great divide:
The challenges faced by the down-stream aluminium sector in India:
Major downstream undertakings are categorised as melting, alloying casting, forming, joining, product making, end applications, etc. The main purpose of the downstream division is to carry out hands-on research on downstream use of aluminium alloys, refining the quality and revenue of the product, offer technical inputs to the downstream manufacturing via R&D projects and mathematical modelling. The downstream aluminium segment is also known to deliver service for structured property co-relation for numerous casting, forming, assembly, and other related R&D undertakings to formulate novel alloys and to recover the present downstream developments. The capacity of the Indian downstream industries has not been well documented like its primary counterparts and have to face a couple of unwelcomed challenges. This is exactly where the great divide falls in place in the sector.
Primary metal producers trade their products in India at import parity taking import duties, which is generating acute cost pressures that downstream industry is incapable of bearing which makes aluminium expensive for the users. This price disparity is what makes India’s MSMEs less able to strive on the universal market, lacks much-needed novelty, and eventually threatens lakhs of job in the sector. An effective solution to this can be removing import tariffs on primary aluminium and increasing import duties on the downstream aluminium products.
Stiff competition due to low margin, the mushroom growth of extrusion manufacturing units in the unorganised sector due to low entry barrier, dumping of aluminium downstream products from nearby countries like China are some of the other major challenges faced by Indian downstream aluminium sector.
The predictable growth trajectory of the aluminium downstream sector:
While the growth appears to be forthcoming in the consumption of aluminium particularly through value-added products, India’s downstream processing domain has been witnessing a gradual yet remarkable advancement in the coming years. In the developed markets, the metal is increasingly substituting wood and steel in the building and construction sector. Aluminium cans and containers are used largely world over, it is also used in the seamless packaging material for pharmaceuticals and processed foods. By contrast, aluminium is consumed maximum in the electrical sector (48%), followed by transportation domain (15%), the sphere of construction (13%) consumer durables (7%), machinery & equipment (7%), the segment of packaging (4%) and others (6%) in India.
The per capita aluminium consumption in India is quite low at 2.5 kg against the global average consumption of 11 kg. Hence, there is a massive possibility for an upsurge in aluminium consumption in our country from the prevailing level of 4 million tonnes. The major growth, however, is estimated to come from the downstream sector by the means of both primary and secondary production of aluminium. An important characteristic of the “Make in India” program will be an import duty hike on downstream Aluminium products to protect the domestic aluminium manufacturers from China which is flooding Indian markets due to 15% subsidy being given by its Government.
The impact on the downstream aluminium sector due to COVID 19:
COVID-19 has almost pushed the world towards an unwanted slowdown. With the anticipation of the global economy contracting by 3.2%, it will impact the overall metal industry, including aluminium, which is the world’s second most important metal. With a gloomy universal forecast and Chinese smelters increasing operations, there will be an inventory glut; moreover, the end-users have been pausing contracts for primary aluminium thus shrinking the demand by 5 million tonnes. The aspects like global recession, condensing markets in the western hemisphere, and dumping from China and FTA countries namely Thailand and Malaysia have posed serious challenges for the aluminium manufacturers in India.
However, even with the fall in aluminium pricing, the market has still not accounted for a possible supply-side cut. It is expected that demand will improve as the world returns to normalcy. The aluminium prices may rally sharply, and rapidly once upward momentum is established, signifying that medium to long-term demand prospects continues to stay confident, with captivating development stories across a good deal of aluminium end-use consumption areas. Additionally, with the government making necessary changes in import duty structure will enable the manufacturers of downstream aluminium to grow and will support the domestic consumption of primary aluminium.
India is one of the fastest developing economies in the world; a mere revitalisation of manufacturing is needed to bring back the country on the road to recovery and growth. The aluminium industry can revitalise the manufacturing sector. Our country has the prospective to become a universal nucleus for the production of metal as India is home to one of the major reserves for high-quality bauxite and coal. With a considerable venture by Indian players in the sector of aluminium, our country is competent enough to get a step closer to the vision of becoming a worldwide competitive performer and to be a large exporter of aluminium products. An increase in import duty on aluminium downstream products to counter the export rebate given by China and provide a level playing field to Indian manufacturers can be a significant step in that direction. This leap in the Indian aluminium industry will confidently contribute to putting India and the Indian economy back on the evolutionary trajectory.