Aluminium majors hurt by spike in imports from US, China levies to blame

Primary aluminium producers fret as imports touch 60% of domestic consumption

The spate of imports of scraps and finished aluminium products has perpetually been a sore point with the primary producers- Vedanta, Hindalco Industries and National Aluminium Company (Nalco). But now, makers are rattled as the share of imports has touched 60 per cent of the domestic aluminium consumption in the April-June quarter of the current financial year, up from 54 per cent at the end of 2017-18.

Overall imports of aluminium rose 19 per cent year-on-year in the last quarter, driven by higher volumes of scrap precipitated by China’s imposition of import duty on US scrap. China’s protectionist levies have spelt unexpected trouble for the primary aluminium producers. Scrap imports firmed up by 24 per cent in the quarter. From the US alone, imports of aluminium scrap into India spiralled 128 per cent.

Apart from scraps, the rising trend in imports of wire rods and alloy ingots from ASEAN countries having free trade agreements (FTAs) with India has roiled domestic products. According to industry data, wire rod inflows into India from the FTA nations has zoomed 200 per cent in the period under review.

“There is a surge of import due to international market conditions, including the imposition of additional tariffs. India needs to protect its domestic market against rising import. With this LME (London Metals Exchange) price of aluminium has come down below $2,000. The Aluminium Association of India (AAI) has requested for QR (Quantitative Restriction) in import. In addition, AAI has called for the abolition of inverted duty structure on caustic soda & also GST input credit for energy cess as aluminium is an energy-intensive industry. Moreover, AAI urged the government to include the aluminium industry in the core industry”, said T K Chand, chairman & managing director, Nalco and president at AAI.

“AAI has also requested for increasing customs duty on import of aluminium end-use products to protect thousands of secondary producers of India”, he added.

Imports are steadily eating into the market share and profitability of the primary aluminium players.

“Rising import has forced domestic producers to sell at lower prices in the market. Profitability has been severely hit, especially in the downstream business which has seen continued and rising losses as import of value-added downstream products continued to increase from China”, said an industry source.

Further, the domestic aluminium industry is jittery over the US government’s levy of 167 per cent anti-dumping duty on downstream products sourced from China. Aluminium demand in the domestic market continues to improve- it grew by 10 per cent year-on-year to 0.92 million tonnes (mt). The demand, however, was hurt by an increase in low-cost imports of fake semis and wire rods from China and ASEAN (Association of South East Asian Nations) countries.

“India is highly vulnerable to heightened dumping from China in the wake of latest developments and the effects are already visible. There is a case for immediate government intervention to arrest this and aluminium should be completely excluded from RCEP (Regional Comprehensive Economic Partnership) negotiations else it can potentially shut down India's aluminium industry”, the source added.

Though production of primary aluminium has logged 11 per cent CAGR (compounded annual growth rate) between FY11 and FY18, imports in the period have grown 12 per cent. In the period, the share of primary producers has shrunk from 60 per cent to 46 per cent.

On the contrary, the Aluminium Secondary Manufacturers' Association (ASMA) sought to downplay the case of expanding scrap imports. “India imported 0.86 million tonnes of scrap in 2014-15 which has increased to 1.11 million tonnes in 2017-18 – an increase of 29 per cent in three years is nothing alarming and justified for a fast-growing economy like India. Scrap is mainly used for making alloy ingots mostly used by the auto industry and the world over, alloy ingots are made by using scrap only”, ASMA had responded to a previous questionnaire by Business Standard.