India's aluminium consumption to increase: Study

New Delhi, June 13: Driven by the continuous robust demand from the end-user segment, the aluminium consumption in India is expected to increase by 8-9 per cent, according to a study.

During FY2006, the domestic aluminium market witnessed a growth in demand particularly from power, automotive and housing sectors and its consumption recorded an increase of 9.5 per cent in FY2005.

In the country, the electrical segment has been the largest consumer of aluminium, accounting for 31 per cent of aluminium consumption, followed by automotive and building and construction segments, which are also poised to grow further. The current housing shortage is estimated to be around 19 million and industry experts forecast at least 7-8 million houses to be added every year, the study conducted by ICRA adds.

The study also sees a large growth potential for aluminium sector in India. ''The current low consumption of aluminium in the country, besides the fact that India has the fifth largest bauxite reserves in the world, points to large growth potential for the sector,'' it says.

India's per capita consumption of aluminium currently stands at 0.8 kg per annum, as compared to China (4 kg), and many other developing nations.

India is a major player in the aluminium sector, especially because of abundant bauxite reserves of 2.46 billion tonnes (sufficient for 211 years of production), which makes the country one of the lowest cost producer of the metal in the world.

It accounted for 8.7 per cent of global bauxite production by producing 14 million tonnes in 2004. However, production of aluminium in India aggregated 0.91 million tonnes in 2005, accounting for 0.4 per cent of world.

After the strong increase in the prices of aluminium in 2005, the study further forecasts that prices of the metal will increase again in 2006, as world consumption exceeds production, leading to a decline in the stocks.

Global aluminium production, which has increased by 3.7 per cent during 2005 to 23.4 mt, is expected to up by 4 per cent during 2006, because of smelter capacity expansion in China and West Asia.

On senstivity of industry to government policies, the survey says, the reduction in the customs duties on primary and secondary forms of non-ferrous items, namely aluminium, copper, zinc and tin, and other base metals, from 10 per cent to 7.5 per cent by the government was a healthy step, which would keep check on a rise in prices.

''Government initiatives to boost the end user segment, like construction, power, automobiles, consumer durables etc, have been positive on demand front.''

UNI