We See Demand in Defence, Aerospace, Transportation
Jindal Aluminium is on a high after the successful acquisition of the Bhiwadi plant of Indo Alusys. Pragun Jindal Khaitan, Vice Chairman and Managing Director of Jindal Aluminium talks to BW Businessworld about the growing importance of aluminium across key industries and much more. Excerpts:
What makes you think there will an increase in demand for aluminium by the auto, durables, construction and other industries? What factors will lead to the increase?
The consumption and demand by the industries for aluminium is going to be fulfilled by its inherent qualities. The automotive sector is witnessing a rising demand as aluminium is a significant contributor to light-weighting and the shift to EVs has seen the metal being sought after. Aluminium alloys are also crucial in the aerospace and aviation sectors, battery casings and such next-generation products. Being a metal that can contribute to larger sustainable initiatives makes aluminium fit to contribute to the green building concepts that modern construction is fascinated with. A metal that complements the move toward a low-carbon economy, and the search for a metal that is light yet strong are probably the present-day factors that are set to lead to an increased amount of aluminium being used the world over.
What steps can be taken to increase the per capita consumption of aluminium in India?
The increase in aluminium consumption from 2.5kg per capita to the global average of 11kg per capita will need the appetite for additional consumption of 16 million tonnes. This will also position India as the second-largest consumer of aluminium in absolute terms. To achieve this, we need a policy mechanism that takes care of the industry concerns. A policy will give the downstream aluminium sector, which plays an extremely crucial role in meeting the economic growth targets of the country, the push it needs. The end goal is to have a high-quality metal that meets the country’s needs without falling prey to global supply and price volatility.
What are the main challenges and issues faced by the aluminium industry?
Downstream aluminium producers need encouragement towards high-end production and value-added exports. This will not just echo the ‘Make in India’ and ‘Atmanirbhar Bharat’ objectives but also emphasise the progress of the overall value chain of the domestic aluminium sector.
Measures like the government making considerations for categorising the downstream as one of the core industries is essential to accelerate the growing consumption curve. This will not only safeguard local producers foraying into the export markets but will also support job creation. Reforms like hiking the customs duty on downstream aluminium products to 20 per cent will help provide a level playing field to domestic downstream manufacturers.
How is price protection impacting the domestic price of aluminium?
Today, we have primary producers exporting almost 50 per cent of their production at LME price and yet demanding higher prices for selling in the domestic market. They are enjoying the protection of about 15 per cent over LME price in the form of 8.25 per cent import duty, premium, and 4-5 per cent that they add towards forwarding and clearing charges. As a result, the existing protection of around 15 per cent is making aluminium expensive and adversely affecting the aluminium industry as a whole. We feel that the withdrawal of this protection by the government will ensure that the Indian aluminium downstream industry thrives.
The current import duty of 2.5 per cent on recyclable aluminium should be reduced. Given the burden of the present import duty, many small enterprises engaged in the circular economy may be forced to shut down, which would result in an increase in unemployment. Recycling aluminium must be prioritised for the downstream industry to prosper, and having a metal recycling policy will be a key step in this direction.
What can the government do to ensure a level playing field in the international market?
To enable a level playing field in the international market, the government should find a way to lower the duties on primary aluminium while increasing the import duties on downstream aluminium. If this is done, the low-cost imports of downstream aluminium products will be replaced by domestically manufactured aluminium products and thus enable the offtake of primary aluminium by local downstream producers and contribute to the overall growth of the industry.
How were the past 2-3 years for Jindal Aluminium?
The pandemic has been a challenging time for all of us. After a sharp condensation of demand initially, the market has picked up. Since the end of 2020, we have been functioning at pre-Covid levels.
While our focus has always been on growth, one of the exciting developments within the company has been our acquisition of the Bhiwadi plant of Indo Alusys in December 2021. This Rs 100-crore acquisition has helped us in reaching out to customers in North India. We operationalised the plant at 500 MT per month in the first month post-acquisition and have scaled it to 1,200 MT per month now. Our efforts are aimed at reviving the local economy, and working with the stakeholders to enable the larger community. Over the next few quarters, we can expect to see a QoQ (quarter-on-quarter) increase in the manufacturing capacity at Bhiwadi. We will be planning to scale it up further to 50,000 MT per annum in FY 23-24. Our production capacity has been rising since 2018-19, achieving 1.4 lakh tonne per annum of aluminium production in 2021-22. Our production per annum has also gone up except in 2020-21 when it slid temporarily owing to the pandemic-led slowdown.
How would you sum up the current state of the Indian aluminium industry in terms of production, consumption and demand?
Metal consumption in India is set to get a push with flagship government programmes like Make in India, Atmanirbhar Bharat Abhiyaan (Self-Reliant India), National Capital Goods Policy, development of 100 smart cities, Power for All, and others. There is a huge local demand for value-added aluminium products in India and the downstream capacity to meet this requirement is adequately available. In terms of production, if we are to look at the Niti Ayog data, the upstream aluminium capacity stands at 4,100KT, while the processing capacity of downstream aluminium is 3,880KT.
When it comes to per capita consumption we still have a lot of catching up to do. Because unlike highly industrialised and high per capita income countries like South Korea which has the highest per capita consumption of 46.7 kg, followed by Germany (29.9 kg), the US (18 kg) and Japan (16 kg) or even middle-income nations like China (24 kg), Brazil (8.6 kg) or Russia (8.4 kg), India has a low per capita consumption 2.5 kg.
When compared to the world average of 11 kg, we are behind but showing improvement and hope. Overall, the future of the Indian aluminium industry looks positive and bright. From being valued at USD 147.2 billion in 2018, the global Aluminium market is expected to reach USD 189.8 billion by 2026.
What are the sectors where you are looking to expand?
Jindal Aluminium currently occupies approximately 25-30 per cent of the market in the extrusion category and 10-12 per cent in the rolling divisions’ segment. We strongly believe in growth supported by blending skills and technology.
Of late, we have also focused on catering to the construction, electrical, consumer electronics, solar and aviation industries. We will also be increasing our focus to meet the wide-scale demand of the burgeoning defence and aerospace sectors in India. We are also looking at playing a greater role in transportation systems like high-speed trains and metro rails along with the packaging industry.
