ICRA estimates healthy domestic aluminium demand growth in FY24 and FY25 aided by auto sector

ICRA has estimated the domestic aluminium demand growth to remain healthy at around 9% 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, the rating agency noted, as it foresees a stable outlook for the domestic aluminium industry.

According to ICRA, the automotive sector significantly influences India's aluminium consumption, with a steady demand expected in FY2024 and FY2025. However, the average vehicle aluminium usage is lower than the global average. ICRA predicts higher usage and transition to electric vehicles.

Giving more insight, Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA, said, "The automotive sector plays a pivotal role in the overall consumption of aluminium in India. After a stellar performance in FY2023, automotive demand is expected to remain steady in FY2024 and FY2025. In addition, the average quantity of aluminium used per vehicle in India remains significantly lower (around 40-45kg) compared to the global average of roughly 160-200 kg. ICRA believes that focusing on vehicular weight reduction to improve fuel efficiency would entail a higher per-unit usage of aluminium, going forward. Further, a significant transition to electric vehicles in the coming decade would also aid domestic aluminium demand in the long term."

“The Central Government’s massive infrastructure development plans, growing urbanisation levels, Housing for All schemes along with railways investment in the metro rails 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 further added.

While domestic demand remains resilient, global aluminium consumption is likely to remain muted in the current calendar year. “A weak macro-economic outlook is likely to curtail global aluminium demand in the near term. The global aluminium consumption is expected to grow by a around a feeble 1% in CY2023.

In addition, global metal supply shows signs of improvement, primarily in China, which is likely to result in a surplus metal balance in the current calendar year. Chinese consumption continues to face headwinds, primarily due to a 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 improvement in global sentiments, ICRA predicted.