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Domestic aluminium demand is expected to grow 9 per cent in the next two fiscal years, given the Government’s thrust on infrastructure development.
Domestic demand growth would sharply outpace the rate of global growth in aluminium demand, said ICRA.
In the domestic market, a major portion of aluminium is consumed in the power transmission and distribution sectors. ICRA notes that the Central Electricity Authority has outlined a planned capacity expansion of 16,600 circuit kilometres (ckm) for the current financial year, which is an increase of over 13 per cent compared to FY2023.
In addition, the Government’s ambitious target to achieve 500 GW of renewable energy capacity by 2032 would entail significant capacity addition for the transmission lines in the coming decade, which augurs well for domestic aluminium demand in the foreseeable future.
Further, an improvement in the solar rooftop installation market, along with large capacity additions expected in the solar module manufacturing industry in India in the next 3–4 financial years, would also drive domestic aluminium demand as a part of the renewable energy transition drive.
Jayanta Roy, Senior Vice President, Corporate Sector Ratings, ICRA, said the Central Government’s massive infrastructure development plans, growing urbanisation levels, Housing for All schemes, and railway investment in the metro rail 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 said.
ICRA believes that focusing on vehicular weight reduction to improve fuel efficiency would entail a higher per-unit usage of aluminium. Further, a significant transition to electric vehicles in the coming decade would also aid domestic aluminium demand in the long term.
Global global aluminium consumption is expected to grow by a feeble one per cent in this year. In addition, global metal supply shows signs of improvement, primarily in China, which is likely to result in a surplus metal balance in 2023.
Chinese consumption continues to face headwinds, primarily due to weak demand in the building and construction segments. Consequently, aluminium prices are expected to remain under pressure in the near term at least, and any improvement would hinge on a stronger recovery in Chinese demand and an improvement in global sentiments, Roy added.
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