ICRA report: Aluminum demand to go up by 9% in 2023-25

New Delhi: ICRA Ltd., forecasts that domestic aluminum demand growth will stay solid over the next couple of fiscal years, given the government's emphasis on infrastructure development. The rate of growth in domestic demand would be far higher than that of aluminum demand globally. ICRA predicts that the local aluminum market will remain stable.

ICRA claims that the country's use of aluminum is primarily influenced by the automobile sector, with consistent demand anticipated in FY24 and FY25. However, local consumption of aluminum is below the global norm. ICRA anticipates increased usage and the move to electric vehicles.

Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA, said, "The automotive sector plays a pivotal role in the overall consumption of aluminium in India. After a stellar performance in FY2023, automotive demand is expected to remain steady in FY2024 and FY2025. In addition, the average quantity of aluminium used per vehicle in India remains significantly lower (around 40-45kg) compared to the global average of roughly 160-200 kg. ICRA believes that focusing on vehicular weight reduction to improve fuel efficiency would entail a higher per-unit usage of aluminium, going forward. Further, a significant transition to electric vehicles in the coming decade would also aid domestic aluminium demand in the long term. The Central Government’s massive infrastructure development plans, growing urbanisation levels, Housing for All schemes along with railways investment in the metro rails network and aluminium-bodied Vande Bharat trains bode well for the domestic aluminium demand. In addition, the Government’s conducive policy is likely to support the rapid transition to new age technologies and clean energy, which remains the tailwind for spurring domestic aluminium demand”, he further added

While local demand is still strong, there will likely be no increase in global aluminum use this year. Global aluminum consumption is projected to be reduced in the near future due to a gloomy macroeconomic outlook. In CY2023, it is anticipated that worldwide aluminum consumption would only increase by a meager 1%. In addition, there are signals that the world metal supply is improving, particularly in China, which suggests that there will likely be a surplus of metal in the balance for the current calendar year.

Chinese consumption is still struggling, primarily because of sluggish demand in the building and constructions sectors. Therefore, it is anticipated that aluminum prices would remain low for the foreseeable future at least, and any improvement would depend on a greater recovery in Chinese demand and improvements in global mood.