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Informist, Wednesday, May 7, 2025

 

MUMBAI – The profitability of Indian primary aluminium manufacturers is expected to remain healthy in the financial year 2025-26 (Apr-Mar), despite some moderation amid global headwinds, including higher US tariffs, Crisil Ratings Ltd. said in a release. Strong operating efficiencies, low-cost operations, and favourable global demand-supply balance will keep margins over a solid $650 per tonne, it said.

 

Realisations for domestic producers are linked to aluminium prices on the London Metal Exchange, which rose around 20% on year to $2,528 per tonne in FY25. This led to the earnings before interest, taxes, depreciation, and amortisation per tonne improving to more than $900 per tonne in FY25, a three-year high, according to the release.

 

Aluminium prices on the LME moderated to around $2,350 per tonne in April from a peak of $2,700 per tonne in March because of the uncertainty around global macroeconomic growth following tariff announcements by the US. "Despite the volatility, aluminium prices on LME could stay above $2,300 per tonne on average this fiscal, given the limited risk of oversupply and the fact that anything materially below these levels will make sizeable global capacities economically unviable," said Ankush Tyagi, associate director at Crisil Ratings. "This, along with the steady cost of production for Indian primary aluminium players, will keep their operating margins over $650 per tonne this fiscal, compared to a 10-year average of around $530 per tonne."

 

The US raised its tariff on aluminium imports to 25% for all countries. The increase in tariff will have limited direct impact on India as the US accounted for less than 5% of India's aluminium exports over the past five fiscals. However, as almost 50% of India's annual primary aluminium output is exported, Indian producers may face increased competition in their regular overseas markets as key exporters to the US divert supplies to other regions, according to Crisil Ratings.

 

"While global demand growth may moderate this fiscal, surplus will still be limited. This is because the global aluminium market faces limited risk of oversupply, as smelters in major aluminium-producing countries, including India, have consistently operated at utilisation rates well above 90%," said Ankit Hakhu, director at Crisil Ratings.

 

"Moreover, there is limited primary aluminium capacity in the US--which has been relying on imports to meet over 80% of its primary aluminium demand--and setting up new smelter capacities has a long gestation period. Moreover, India's position as one of the lowest-cost primary aluminium producers globally provides a comfortable cushion against potential increase in competition in overseas markets," Hakhu added.  End

 

US$1 = INR 84.80

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Ashutosh Pati

Edited by Rajeev Pai

 

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