Chinese aluminium squeeze opens avenues for local firms

The domestic aluminium industry is poised to grab a higher share of the export market as Chinese smelters plan to stop exports on fears of a change in policy next year, according to industry sources. India's share in world aluminium market is a meagre 3.02 per cent.

Sources said Chinese aluminium smelters were considering not to concentrate on exports as Beijing has trebled export tax to 15 per cent on primary aluminium ingot to cool investment in the resource-hungry aluminium industry.

The tax change has spurred smelters, holding export contracts in 2006, to rush to ship aluminium to bonded warehouses for delivery in November and cancel most shipments in December, sources said.

"Before government takes any change in policy in 2007, we want to meet our commitment. No further commitment is being made for the shipment in 2007," a local trader said.

India ranks sixth in bauxite mine production after Australia (62 MT), Guinea (17.40 MT), Brazil (16.20 MT), Jamaica (15 MT) and China (10.67 MT). With a total output of 9.28 MT, the country contributes only 5.84 per cent of the world total of 159 MT.

But, India holds 5th position in reserves base and is ahead of China with 2300 MT. Chinese bauxite reserves base is estimated at 2000 MT. In spite of fifth largest deposits, which accounts for 6.76 per cent of the world total, India ranked seventh in alumina production with a total output of 3 MT, contributing only 4.91 per cent of the world total of 61 MT.

Indian integrated aluminium producers would benefit more from the higher global demand and prices thereby once the supply from China takes a halt. Especially, the new capacity addition would fetch more revenue and strengthen companies widely. Globally, aluminium demand is expected to grow by 8 per cent over the next two years while supply is expected to remain tight as no major new supply sources coming in at least in near future. Moreover, product mix would improve as companies convert their base metal into value added products.