The India aluminum paradox

India’s Domestic Demand

In addition, not all of India’s domestic demand can be satisfied by local producers. That’s because the vast majority of India’s scrap aluminum buyers—many of them small- and medium-sized companies—are in the market for aluminum alloys that are not produced in sufficient quantities by domestic smelters. SMEs that produce manufacturing extrusions, rolled products, cables and conductors, auto casings, utensils, and products for India’s growing construction and packaging sectors will see their already slim margins squeezed if the government imposes new import tariffs.

The numbers also indicate that the primary buyers for domestic smelters are outside of India. That explains why exports have been rising so strongly in recent years, not only for primary aluminum but also for certain specialty aluminum alloys.

It remains to be seen whether the government of India will impose new import tariffs on aluminum. If it does, the biggest effect will probably be to hurt domestic Indian manufacturers, while having little impact on overall import patterns. The failure of such a policy would also expose the fallacy of viewing metals like aluminum as unitary products, when, in fact, it represents many dozens of products, not all of which, by a long stretch, are produced by every metal-producing country. Better to leave the market to its work, which, in this case, yields the result that, with the continued growth of the Indian economy, both aluminum imports and exports will likely to continue to rise.