After a spell of subdued demand, the aluminium industry is likely to register double-digit growth this financial year on the back of rising auto sales and an uptick in industrial activity.
According to major aluminium producers of the country, factors like increasing public investment in infrastructure, power sector reforms and robust rural demand will be other growth drivers.
"Indian demand is expected to witness a strong double-digit growth following the steps taken up by the government to boost industrial production, its investment in infrastructure and its thrust on power sector reforms. Good monsoons are expected to boost rural demand," Hindalco, an Aditya Birla Group company, said in a conference call with analysts.
Earlier, state-run National Aluminium Company Ltd.'s (Nalco) chairman TK Chand had also said that rise in auto sales was driving aluminium demand in the country.
Globally, demand is slowly improving after years of glut. "The Chinese demand has witnessed a strong recovery, which is surprising on the positive side. Buoyancy in the property market, infrastructure investment following stimulus and tax rebates and automobile industry have helped the demand pickup," Hindalco said.
In the past, the sector had faced many headwinds due to capacity addition in China, leading to oversupply in the global market. This in turn pulled down prices of the metal at the London Metal Exchange and pushed many aluminium producers out of the market. During last year, global production declined by around 4 million tonnes due to closure of many high-cost units in China.
But now, prices at the London Metal Exchange — the benchmark for global pricing of the metal — recovered a bit due to an improved demand-supply scenario.
The 3-month futures price of aluminium is now hovering around $1,700 per tonne at the LME and producers are of the view that it would improve further.