Aluminium makers fret as scrap imports close in on domestic sales

Between April and December of this fiscal, scrap imports touched 1,001 tonnes, steadily narrowing the gap with sales of 1,191 tonnes by domestic manufacturers

Battered by the spate of cheaper aluminium imports into the country, the domestic producers are piqued at the narrowing differential between scrap imports and their domestic sales.

Between April and December of this fiscal, scrap imports touched 1,001 tonnes in volumes, steadily closing in on the gap with sales of 1,191 tonnes by domestic manufacturers. Year-on-year, scrap imports rose 19 per cent. Imports other than scrap spiked 24 per cent in the period under review, pushing up overall aluminium imports by 21 per cent  by volumes. At the end of December 2018, share of imports to the country's total aluminium consumption had swelled to 60 per cent, unnerving the producers.

In the run up to the Interim Budget for 2019-20, the domestic producers represented by Aluminium Association of India (AAI), had lobbied for hike in import duties of scrap and downstream products. AAI suggested to the government to raise import duty on scrap from 2.5 per cent to 10 per cent and revise it to 20 per cent from 7.5 per cent for downstream products.

While the Budget was mute on tweaking the duty structure, the Union government's recent stand to retain status quo on import duty rates possibly fearing a backlash from the World Trade Organization (WTO), has dashed the hopes of both primary and secondary aluminium manufacturers.

“The import of scrap, downstream and 'fake semis' is expected to increase in the coming months if the government does not take any action. The profitability of the primary producers will be affected to the extent of realization difference between export and domestic sale. If the downstream import from China goes up at the same rate, the downstream producers in India will be in trouble,” said an industry source.

The country's growth and consumption parameters in aluminium are robust. Consumption of the white metal expanded by 11 per cent during April-December 2018. But growing volume of imports has queered the pitch for leading aluminium players like Vedanta Ltd, Hindalco Industries and the state controlled National Aluminium Company (Nalco). Sales numbers of the three primary producers added up, dipped one per cent in this period. Imports have been squeezing the consumption pie disproportionately for the homegrown aluminium makers. Market share of imports in domestic aluminium consumption has shot up from 40 per cent in FY11 to 60 per cent by December last year. 

To combat the swarm of imports, aluminium producers feel the government needs to step in with safeguard and anti-dumping duties on downstream products. “The government can work on non-tariff barriers like standards for scrap which is being in the consultation stage for some time. This needs to be expedited,” the source added.

Suggested measures from the industry include end user certification for scrap imports, pre-shipment inspection for all products, BIS standards for all products especially scrap and tracking rules of origin for primary aluminium, foils, flat rolled products and extrusions.

In last fiscal, India imported 1.96 million tonnes of aluminium valued at $2 billion, representing one per cent of the country's total imports. Of the total aluminum import basket, scrap imports were valued at Rs 13,000 crore. In volume terms, scrap comprised 57 per cent of the overall aluminium imports.