Domestic aluminium cos pitch hard on three levels to counter cheap imports

In a bid to bring down the country’s aluminium imports, domestic primary aluminium producers such as Hindalco Industries and Anil Agarwal-led Vedanta Ltd are working with the government on three levels—primary aluminium, scrap and downstream products, to counter the issue.

To counter imports of primary products, the domestic primary aluminium producers are working for both, trade remedial measures (such as anti-dumping duty, anti-subsidy duty among others) as well as new product development drive.

“We are involved in quite a few import substitution projects and are working closely with the government currently to put more defense alloys and aluminium material,” Satish Pai, managing director at Hindalco Industries said at the company earnings concall.

Currently, cheap aluminium imports constitute 60 percent of the country’s total lightweight metal consumption.

Meanwhile, the domestic aluminium industry is capable of substituting 100 percent primary products and about 50 percent of downstream products that are imported into India with its existing capacities, said industry officials.

Vedanta Ltd together with Bharat Aluminium Company Ltd has a total integrated aluminium capacity of 2.3 million tonne, while Aditya Birla Group company, Hindalco Industries has an aluminium smelting capacity of 1.3 million tonne.

“Vedanta Aluminium has put up a facility to make alloy wheels, becoming the first player in India to commercially produce primary foundry alloys for Indian automobile industry,” said Sunil Duggal, chief executive officer at Vedanta Ltd.

India has been one of the largest importers of primary foundry alloys until two years ago.

Alongside, to counter the heavy aluminium scrap imports, domestic producers have been requesting the government and Bureau of Industry Standard (BIS) to develop quality standards for aluminium scrap imports in accordance with international aluminium scrap standards of European Union and China.

The industry officials have also been requesting government for a non-ferrous metal recycling policy and incentivise domestic recycling of aluminium scrap so that India does not have to depend on imported scrap.

Aluminium scrap constituted 62 percent of the total aluminium imports in FY20.

While the plan to lower imports of the metal looks strong, there continues to be strong scope for circumvention, which could leave the producers’ efforts ineffective.

“In order to have a check on possible circumvention, we are requesting the Government (of India) to establish Aluminium Import Monitoring system and start tracking the Aluminium metal import possibilities into India under various HS codes even before the actual import can happen,” informed Duggal.

An Import Monitoring System have already been established by the government for the steel industry.

“With these developments within the industry Vedanta Aluminium hopes to increase its domestic market share by about 4-5 percent within one year and by another 5-7 percent within next year,” said Duggal.

Vedanta Aluminium contributes to about 40 percent of primary aluminium consumption market share in India as per FY20 data.

When it comes to over-all aluminium consumption of India, the company contributes around 17 percent of the market share, since 60 percent of country’s aluminium requirement is met completely through imports, Duggal added.

On the pricing front, imported primary products enjoy inherent benefits under various export promotional schemes passed on by the government of respective countries to their exporters along with duty free imports from countries having trade agreements with India.

However, the cost of production in India is comparatively high mainly because of logistics cost and taxes. If duty free imports are checked, the domestic industry would stand a chance for at par pricing to imports.

“Producers are exporting primary aluminium at LME prices (London Metal Exchange) but selling same products domestically at 13-14 percent higher in order to match the landed cost of imported material. This is posing a problem for MSMEs as it is costly for them to buy domestically or lose consumers to Chinese imported products,” Anil Agarwal, patron of Aluminium Secondary Manufacturers Association (ASMA) told Business Standard.

Currently, there is a net 8.25 per cent duty on imported primary aluminium such as ingots.

Primary producers are demanding for a duty hike to 10 percent, which means there could be a further hike in domestically made products as producers would look to match the landed cost, said a Mumbai-based secondary manufacturer on condition of anonymity.

Domestic primary aluminium producers export 1.4 million tonne ingots annually at international prices.

Domestically, about 2.3 million tonne of ingots are being sold at landed cost price to Indian consumer.

“The increased aluminium imports the industry is complaining about is only scrap. Not much of primary aluminium comes into the country via imports, only about 60,000 tonne comes to India as advance licence which is not much. Government needs to look at hidden agendas of the producers as well so that there is justice to all players of the aluminium market–big as well as small,” said Agarwal.