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The United States' decision to implement a 90-day pause on reciprocal tariffs has prompted Indian aluminium producers and industry analysts to closely scrutinize the potential impacts on trade flows and the domestic market. While India's steel exports to the US constitute a relatively small proportion of its primary aluminium production (not exceeding two percent) or its overall output shipments (around four percent), the primary concern revolves around safeguarding the Indian market from potential dumping activities originating from other nations, particularly China and those in the Middle East. The global market has witnessed considerable volatility, and the unexpected reversal of tariffs by US President Donald Trump, which initially targeted a broad spectrum of nations, adds another layer of complexity to the situation. Although the tariffs were suspended for 90 days for most nations, the tariff rate on Chinese imports was notably increased to 125 percent. The existing 10 percent tariff that came into effect on April 5th will still remain in place. The initial announcement of reciprocal tariffs on April 2nd by the US included an additional import duty of 26 percent on India. The aluminium industry, however, finds itself outside the scope of this reciprocal tariff order, yet it already confronts a pre-existing 25 percent levy imposed by the US administration earlier in March. This pre-existing tariff significantly impacts the competitiveness of Indian aluminium exports in the US market. B K Bhatia, additional secretary general of FIMI (Federation of Indian Mineral Industries), expresses the view that the tariff pause is unlikely to yield any tangible benefits for the aluminium industry. He emphasizes that the 25 percent tariff already imposed on aluminium and steel remains unchanged and was not encompassed within the reciprocal tariff framework. This underscores the industry's ongoing challenge in navigating the US tariff regime. Looking at trade data from the financial year 2023-24, India's total exports of minerals and non-ferrous metals (excluding steel) amounted to USD 17,474 million. Within this total, exports to the USA accounted for USD 1,291 million, representing approximately 7.4 percent of the total exports of this sector. Aluminium and related articles constitute the major share of these exports, with a value of approximately USD 946 million. Copper and its articles follow at USD 292 million, while baryte exports amounted to USD 78 million. The dependence on the US market for aluminium exports highlights the industry's vulnerability to changes in US trade policy. The 90-day pause, therefore, provides an opportunity for the Indian aluminium sector to carefully assess the evolving situation and develop strategies to mitigate potential risks and capitalize on any emerging opportunities. This includes monitoring trade flows, strengthening competitiveness, and exploring alternative export markets.
The aluminium industry in India is a significant contributor to the country's economy, providing employment and generating substantial export revenue. The sector is characterized by a mix of large integrated players and smaller downstream processors. The integrated producers typically have their own bauxite mines, alumina refineries, and aluminium smelters, allowing them to control the entire value chain. The smaller downstream processors, on the other hand, rely on sourcing aluminium from the integrated producers and converting it into various products such as sheets, foils, extrusions, and castings. The Indian government has been actively promoting the growth of the aluminium industry through various policy initiatives, including providing incentives for capacity expansion, encouraging technology upgradation, and facilitating access to raw materials. The government has also been focusing on promoting exports of aluminium and its products through various trade promotion measures. However, the industry faces several challenges, including high energy costs, dependence on imported raw materials, and competition from imports. The imposition of tariffs by the US has further exacerbated these challenges, making it more difficult for Indian aluminium exporters to compete in the US market. The industry is therefore looking to the government for support in mitigating the impact of the tariffs and enhancing its competitiveness. The 90-day pause in tariffs provides a temporary respite, but the long-term outlook for the industry remains uncertain. The industry needs to focus on improving its efficiency, reducing its costs, and diversifying its export markets to ensure its sustainable growth.
The analysis of the aluminium sector’s response to the 90-day tariff pause necessitates a broader understanding of the interplay between global trade policies, domestic economic conditions, and industry-specific dynamics. The initial concern regarding potential dumping from countries like China, now facing a higher tariff rate of 125 percent in the US, might not materialize as drastically as anticipated. The increased tariff could deter Chinese exports to the US, potentially redirecting some of that supply to other markets, including India. This could lead to increased competition and downward pressure on prices, requiring Indian producers to enhance their competitiveness through cost optimization and product differentiation. Furthermore, the resilience of the Indian aluminium sector hinges on its ability to diversify its export markets. While the US remains an important destination, accounting for 7.4 percent of total mineral and non-ferrous metal exports, focusing solely on this market exposes the industry to the vulnerabilities of US trade policy. Exploring opportunities in other regions, such as Asia, Europe, and Africa, is crucial for mitigating risks and ensuring sustained growth. The industry must also invest in research and development to develop innovative products and processes that cater to the evolving needs of global markets. This includes developing high-strength alloys, lightweight materials, and sustainable production practices. Collaboration between industry, government, and research institutions is essential to drive innovation and enhance the competitiveness of the Indian aluminium sector. Finally, the government’s role in facilitating a conducive business environment is paramount. This includes streamlining regulations, reducing bureaucratic hurdles, and providing access to affordable financing. The government should also consider providing targeted support to small and medium-sized enterprises (SMEs) in the aluminium sector to help them overcome challenges and enhance their competitiveness. The 90-day tariff pause provides a window of opportunity for the Indian aluminium sector to reassess its strategies and prepare for the future. By focusing on competitiveness, diversification, innovation, and collaboration, the industry can navigate the challenges of global trade and achieve sustainable growth.
Source: How will the 90-day tariff pause impact India's aluminium sector?