Earlier this year, India became the largest importer of aluminium scrap in the world.
The surge in import of aluminum scrap has created a panic among primary producers of the metal in India, with local manufacturers losing market share, and calling the government for support.
Scraps have fueled overall aluminium import, which has increased by 18 percent in the 2019 financial year, and is hurting an industry already reeling under lower prices and high production cost.
In the first three months of the year, India overtook China as the largest importer of aluminium scrap in the world. According to S&P Global Platts, India imported 3.34 lakh tons of scrap in the three months till March, as compared to 3.3 lakh tons by China.
While China's imports have fallen from a year ago, India's has increased. China has classified aluminium Scrap in restricted import list to restrict Scrap import from July, 2019, and plan to completely ban scrap and waste by 2020.
"This is leading to India becoming a dumping ground. Aluminium scrap is 22 percent lower priced than primary aluminium. Thus many of the domestic users now prefer to buy scrap, despite the obvious quality difference between the two," Rahul Sharma, Vice President, Aluminium Association of India, told Moneycontrol.
This has led to the domestic industry losing its market share. "In the last eight years, domestic producers' market share has decreased from 60 percent to 42 percent," said Sharma, who is also the CEO of Vedanta's alumina business.
Disturbing the balance
India has a capacity of 4.1 million tons of aluminium per year, with the demand at 4 million tons in 2018.
Even as imports increased, domestic sales have fallen by a percent.
It also mattered that aluminium prices have fallen on the London Metal Exchange, by 24 percent, in one year. "While in May 2018, the price was $2,290 per ton, this year, it is at $1,740 per ton," said Sharma.
At the same time, adds Sharma, cost of production has been high, increasing by 25 percent in the last five years. "The cost of production has gone up due to increase in power charges, coal cess and higher logistics expenditure," he said.
Highlighting the issues, the Aluminium Association of India, has asked the government to address the concern in the upcoming Union Budget on July 5.
It has requested the government to increase customs duty on imports to up to 12.5 percent. At present, the duty varies from 2.5 percent to 10 percent, on products such as primary aluminium, scrap and downstream products."The steel industry, in the past, has got support of the government. This has helped in reducing steel imports. Same should be done for the aluminium industry too," said Sharma.