THE“BEAT P ieaher Vikram Kasat Head - Advisory "Know what you own, and know why you own it” - Peter Lynch ALUMINIUM An Atmanirbhar Metal ‘Aluminium is the second most-used metal in the world after iron. Starting with consumer electronics, household appliances, cooking utensils, doors and windows, food packaging, foils, cans, office work stations, automotive, ‘transportation, electrical to industrial uses in the form of industrial appliances, aircraft, ships, trains, defence, communication equipment to spacecraft and so on. Despite having massive bauxite deposits (raw material for aluminum), India is dependent on imports for meeting its requirements due to higher costs. tial China is the world’s largest producer and consumer of aluminum followed by India. Recently China has announced that its aluminum sector should slash emissions 5% by 2025 whereas India slapped anti dumping duty on aluminum. ‘So what's cooking in? ‘Aluminum prices hit a 13-year high of $3172 a ton in 2021 due to demand-supply mismatch. Aluminium prices near decade high as global economy rebounds S per tonne Contact us Vikram Kasat ©+91 93727 92797 | Palak Agarwal ©+91 84607 49299Canty (On demand side, there was a pent up demand from lightweight construction, automobiles (EV) and packaging. This is also driven by the pursuit of ‘green economy’ and the speeding up of steps towards electrification and renewable energy as we can see in recent surge in electric vehicles sales, Demand is rising from various sectors such as packaging, construction, electrical equipment. The automobile industry has also been increasing the use of aluminum to reduce the weight of cars, and achieve higher fuel efficiency as aluminum is Up to 65 percent lighter than steel, apart from being strong and recyclable. Its also used heavily in electric vehicles, which have reported strong growth in sales even during the pandemic and is also expected to give 7580 percent cagr in 2W EV in coming years. Eva On the supply side, production was hit because of the power curbs in China and Europe, given that aluminum production is energy-intensive. Apatt from power cut, China also witnessed a plant explosion with aluminum capacity of 300,000 tonnes, recently, the Xinjiang region, China's smelting hub that accounts for one-fifth of the world's supply, imposed output limits on five smelters, Also during August, a fire forced a large bauxite refinery in Jamaica to shut down, created ripples in the aluminum supply market helping aluminum price rise further. From the above it's clear that demand is outstripping the supply. Global Aluminium Industry J ee) Source: HINDALCO YTD CY21 (vs YTD CY20) * Global production grew by 5%, consumy increased by 12%, leading to deficit of 0.9 Mt » China: Production increased by 7%, consumption grew by 8% resulting in deficit of 1.1 Mt » World Ex-China: Production was up by 3%, consumption rebounded by 17%, causing deficit of 0.2 Mt Q3 CY21 (vs Q3 CY20) * Global production expanded by 4%, consumption grew by 5%, leading to overall deficit of 0.3 Mt » China: Production rose by 3%, while consumption increased by 1% resulting ina deficit of 0.7 Mt » World Ex-China: Production grew by 5% consumption improved by 12%, leading to surplus of 0.4 Mt Contact us Vikram Kasat (© +91 93727 92797 | Palak Agarwal (©) +91 84607 49299THEMBEAT P titiadner arm cam =n ame Source: HINDALCO Aluminium Flat Rolled Products (FRP) Industry "+ The global FRE Demand is estimated to grow by “BX in Y24 (vs CY20 contraction of 4%) on account of demand recovery and base eect. Devenneeans Automotive Specialities C12 Growth io Market Deron 721 roth i Marke omens 121 Geowthn Meret Demend + Customer semand connie tore 2088 a the eons + Increasing seman of cans is ion by higher at home ensumpton as well a Increasing share of Casas the sutaable paaging opt er Beverages. + Sigiteane on mater cpsety expansions announced ne 23 ors aos regions ‘Shorter uncertain rated by se conduct sherage nto C2022 + Strong undering demand driven by new roam adoption and increased consumer reference for SUVs iwc, lect + Favorable housing funéamentlsin the US and Europe driving strong BEC eran + Strong seman aross mares, eluding ‘econ cocaine and pated products Source: HINDALCO In Q2 FY22 the Domestic demand is likely to record 943 KT (26% growth YoY) due to low base effect. Sequentially there was an increase of 4%, © Sequentially domestic markets recovered marginally due to improved Packaging, Electrical, Building & Construction, Consumer Durables, Industrial Machinery. However, auto demand softened due to semiconductor shortage which led to 1% degrowth in scrap imports (Q1 to Q2.FY22) In Q2FY22, India FRP Demand is estimated to grow 34% YoY due to low base effect. Sequentially, the demand grew by 5% oa © Demand remains strong in packaging, consumer durables. B&C demand improved due to Government projects. However, auto sector faced some headwinds. © Demand is likely to grow in Q3 FY22 due to strong packaging, Consumer durable, and B&C demand. Contact us Vikram Kasat (© +91 93727 92797 | Palak Agarwal (© +91 84607 49299THEM BEAT P iiaahes eG For India to become Atmanirbhar and a manufacturing powerhouse, aluminum will play a key role. The per capita aluminum consumption of India (at 2.5 kg) is significantly lower than the global average consumption of 11 kg. With a progressive infrastructure push, there is a massive possibility for an upsurge in aluminum consumption in our country. The government has been announcing Production Linked Incentives (PL) across sectors which need aluminum as a raw material Even the electric vehicles are set to push the demand for aluminum exponentially, with innovation in products being the focus of the downstream aluminum sector. From 69,012 units in 2017-18, EV sales zoomed to 1,67,041 units in 2019-20. Two-wheelers have led this growth. This is an opportune moment for the downstream aluminum sector ~ which is an old partner of the automobile industry. However innovation in production is also crucial to raise the average quantity of aluminum used per vehicle from India's average of 29 kg per vehicle to global usage standards of 160 kg or 250 kg as predicted for use in EVs in time to come. Aluminum is one metal that offers can be recycled multiple times without losing any properties. As per the World Economic Forum, 75 per cent of the aluminum ever produced is still in use, Recycling aluminum takes 5 per cent of the electricity required to produce the same quantity of virgin aluminum. Thus, aluminurr-in-use should be an integral part of a plan to achieve the planet's green goals and development ambitions. At the same time, according to the latest IAI (International Aluminium Institute) figures, the sector, including primary, secondary, and downstream aluminium producers, contributes roughly 1.1 Gt CO02e or 2 per cent of global emissions. A NITI Aayog report, backing the need for an aluminum policy, notes that even at low consumption levels, aluminum contributed to 2 per cent of Indian manufacturing GDP. However, itis expected to increase with the consumption growth, critical for achieving 25 per cent of GDP from manufacturing over the next few years, Aluminum is Atmnanirbhar metal as itis helping in green economy, anti dumping duty has also been imposed to improve local manufacturing, demand is outstripping the supply giving a better pricing, it’s also expecting to fetch more share in manufacturing GDP, these factors give aluminum a huge runway ahead. Share your feedback at vikramkasat@plindia.com or (©) +91 93727 92797 palakagarwal@plindia.com or (© +91 84607 49299 Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing