Indian secondary aluminium demand is expected to grow by around 7-9% compound annual growth rate (CAGR) in the period of 2023-2028, from 1.7 million tonnes in 2023 to around 2.4-2.5 million tonnes by 2028, with demand from automotive to grow by 7-11% CAGR, according to Manoj Agarwal, managing director and chairman at major Indian secondary smelter CMR Green Recycling.
The country’s automotive sector is already established as world’s third-largest market, surpassing previous third-placed Japan and behind only China and the US, according to government officials in January 2024.
“Automotive demand contributed around 40% to overall secondary aluminium demand in India in 2023 and it is expected to increase to 40-45% by 2028,” Agarwal said.
Demand for purchasing aluminium scrap remains relatively firm in India, amid growing capacity at secondary smelters and new entrants to the market, but workable prices for importers is being constrained by weak margins due to poor local semi-finished demand, market sources told Fastmarkets on the sidelines of the MRAI conference.
On the other hand, stronger local consumption in major generator nations such as the US is reducing supply to India, as well as key rival importers such as Thailand, sell-side sources told Fastmarkets.
Power shifting east
Stronger Indian demand is part of a wider movement with greater buying power being concentrated in major eastern nations such as China and India, according to Kunal Shah, head of commodity research at Nirmal Bang.
According to International Monetary Fund (IMF) projections, the global economy was $105 trillion in 2023, with US’s economy standing at around $27 trillion and China at around $20 trillion, Shah said.
“Now, as per the latest report by Goldman Sachs, China by 2050 will be $42 trillion economy, the US will be $37 trillion economy, and India would be $22 trillion economy,” he said.
“So, imagine this kind of disruption is taking place, where the power is shifting to east and we are one to determine the outlook of commodity pricing going forward,” Shah added.
Bullish aluminium metal
Aluminium metal prices are expected to improve from February or March onward, according to Shah.
“I am expecting a bull run to take place, not because of demand or supply, but China which is likely to bring stimulus package and lots of required rates of return (RRR) cuts to infuse liquidity in the market and to boost the economy,” Shah said.
“Unlike [the] US’s 10-year bond yield which is continuously going up, China’s 10-year bond yield is continuously going down and posting deflationary scenarios,” Shah said. “Technically, if the US wants to print money they cannot do that because the inflation in the economy will shoot up and they will not be able to service their debt.”
“But considering China’s bond yield rates, which are historically low, if [China] wants to come up with any stimulus package – which they have not done in the past five years – [they] can come up with [a] $1-1.5 trillion package easily,” Shah added.
The LME three-month aluminium contract was $2,619.50 per tonne at the 5pm close of trading on Wednesday January 29, down by 0.55% week on week from $2,634 per tonne.
Amid the lower LME prices, aluminium scrap prices to India have also edged down in recent days.
Fastmarkets’ weekly price assessment for aluminium scrap, cast wheels (Troma), cif India was $2,370-2,400 per tonne on Wednesday, down from $2,400-2,450 per tonne on January 22.
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