ComTra

Commodity Aluminium
Team- Tradegurus
Team members:
-Suryanarayan Panda
-Anmol Garg
-Shubham Badkur Jain
-Harshit Vyas

MBA IB 2014-16 Batch

Indian Institute of Foreign Tra

Agenda
Introduction
Value Chain of Aluminium
Bauxite and Aluminium Production in India
Indias Exports and Imports of India
Domestic Trading Exchange
Domestic Production Analysis
Domestic Production and Demand Drivers
Major Global Bauxite and Aluminium Producers
Leading Global Importers and Exporters
Analysis of International Trade
Global Trading Exchanges
Historical Price Trend
Fundamental Analysis
Global Production Analysis and Drivers
Commodity Balance Sheet Framework

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INTRODUCTION
Wond
er
Metal

Light
weig
ht
Corro
sion
Resis
tant

Alumini
um
Fastest
growing
metal
in 30
years

Most
Abunda
nt
Metal in
Earth

Good
ther
mal
and
electr
ical
cond
uctivi
ty

Ducti
le
Proper
ties
Malle
able
Relat
ively
Soft

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Value Chain of Aluminium

Raw
Material

Intermediate Product

Final
Product

n
si o
u
r
Ext ts
o
Ing

Bauxite

Mined from few

metres below the
Earth

Alumina

Alumina is extracted
from bauxite through
refining processes

Alumini
um

Refined alumina
transformed into
aluminium in
smelters.
Characterised by
high electricity
and carbon usage

Aluminium
billets
Civil
engineering
design

Sheet Ingots

Packaging
Building
Automotive and
Transport
Fou
ndr
General
yA
lloy
Engineering
s
Cast in different
shapes
Wheel Rims
Chassis and
suspension
components
Electrical
components

Value Addition at Each

Step
Bauxite
$45-50 /tonne

Alumina
$310$320/tonne

Aluminium
$20252500/tonne

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Bauxite Producing Areas of India

Bauxite
Production
State/Year
Chhattisgarh
Goa

Production in Tonnes
200910
2010-11 2011-12
16870
69 2109949 2365304

Odisha

31050
26873
06
16705
77
12331
6
10568
47
19850
06
48795
80

Tamil Nadu

3342

Gujarat
Jharkhand
Karnataka
Madhya
Pradesh
Maharashtra

100900

84700

938574

843497

1855993 1830850
64643

83019

616319

617146

2133736 1937898
4856808 5045888
45898

69092

Source:Indian Minerals Yearbook 2012, Indian Bureau of

Mines

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minium Production in India

State Wise Production

2009-10

2010-11

2011-12

2012-13 (Up to
January, 2013)#

State/UT
Quantity Value(R Quantity Value(R Quantity Value(R Quantit Value(R
(in
s. In
(in
s. In
(in
s. In
y (in
s.
tonnes) crore) tonnes) crore) tonnes) crore) tonnes) incrore)
Odisha

8,52,009
9,56,937 10,187.6 9,98,474 11,497.4 8,38,24 10,366.48
7,466.95
.00
.00
3
.00
5
7*
*

Odisha is the largest

bauxite producer of the
country, having the
countrys only PSU
(NALCO) involved in the
production of
Aluminium
Panchpatmali mines in
Koraput are Asias
largest bauxite mines

Chhatisga 2,68,425
2,55,298
2,45,654
2,06,05
2,950.00
3,327.00
3,114.00
2,761.00
rh
.00
.00
.00
3
Uttar
3,99,198
4,09,958
4,18,268
1,92,46
2,822.72
3,132.28
3,812.28
2,021.51*
Pradesh
.00
.00
.00
8*

Annual National Production

1,200,000
1,000,000
800,000

Year

600,000
400,000
200,000
0

(In
tonnes)

200
9201
0

Source: Press Information Bureau, Government of India, Ministry of Mines, March 2013

Production (Quantity in
tonnes; Value in Rs.'000)
Quantity

Value

2009-10

14,80,568

12,37,71,762

2010-11

16,21,033

16,28,44,955

201112(P)

16,54,156

18,36,57,146

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Indias Exports and Imports of

Aluminium
Import/Export (By Value
in USD)

2009

2010

2011

2012

2013

Imports

1,417,460

2,063,534

2,834,980

3,081,740

3,177,639

Exports

979,112

1,328,025

1,423,415

1,579,450

2,078,003

Top 5 countries (by value) for India for importing

Aluminium and its products:
China, United Arab Emirates, Saudi Arabia, United Kingdom
& Oman
Indias
major
aluminium product
imports include:
Aluminium waste and
scrap
Aluminium plates,
sheets and strip, of a
thickness exceeding
0.2mm
Aluminium foil

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Domestic Trading Exchange

Multi Commodity Exchange of India
The Multi Commodity
Exchange(MCX)
of
Limited
India Limited (MCX) is a Indiabased state-of-the-art electronic
commodity futures exchange that
facilitates online trading, and
clearing
and
settlement
of
commodity futures transactions,
providing a platform for risk
management.

The Exchange, which started

operations in November 2003,
operates within the regulatory
framework
of
the
Forward
Contracts (Regulation) Act, 1952.
Indian aluminium industry
consists of four primary producers:
Hindalco, NALCO (a Government of
India enterprise), BALCO and

Source : http://www.mcxindia.com/

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Indian Aluminium Production Analysis

Key Factors Influencing
Production Levels

Non
Availabil
ity of
Bauxite

Low
global
Aluminiu
m Prices

Smelters operating
below capacity due to
unavailability of raw
material on time
Denial of environmental
clearances for new
mines
Land acquisition
problems
Major Indian metal
producers waiting for
global price recovery
Decline in domestic
coal supplies
Integrated companies
not willing to spend on
imported coal

Vedanta not
allowed to mine
from Niyamgiri
hills

Coal shortages
disrupting
electricity
generation

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Key Domestic Production Drivers

Electricity and Consumer Durables
Bulk of aluminium is used in overhead
conductors and power cables involved in
electricity generation, transmission and
distribution
Use in consumer electronics for backing plates
in TV, tablets and consumer electronics
Building and Infrastructure
Consumption in this sector expected to grow at
a CAGR of 18-20%
Demand for enhanced quality driving use of
Aluminium extrusions to construct stadiums,
residential and shopping centres, bridges etc.
Transport and Packaging Industry
Higher production of automobiles, railway
coaches and increasing urbanisation
Rise in demand for aluminium in food
packaging, beverage industry and
pharmaceutical

Growth of solar
and wind energy
is leading to rise
in Aluminium
consumption
Current Indian
production is
sufficient for the
current demands

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Key Domestic Demand Drivers

Demand Drivers
Analysis
Low
Per capita consumption in India
High demand from user industries
like power, infrastructure and
transportation
General shift in the automobile
industry from steel to aluminium
Per capita aluminium
consumption in Kilograms

Demand Drivers

Substituti
ng Trends

Manufacturers willingness to
substitute other metals for
Aluminium in their products
drives up the demand
Niche
industries
like
Aerospace
industries
are
increasingly using aluminium
in their usage

Per capita
consumpti
on

Low per capita consumption

of aluminium in India is
driving
the
growth
of
Aluminium

Economic
Growth

Growing economy have been

instrumental for the demand
of aluminium in power and
other sectors

Price
Advantag
e

The price advantage that

aluminium has over copper
means that aluminium wins
more market from the red
metal
Aluminium
has
been
replacing
copper
as
the
medium
for
electricity
conduction in cables

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Major Bauxite Producing Countries

Country

Production (2013
production in
thousand metric
tons)

Australia

77000

China

47000

Brazil
Indonesia
India

34200
30000
19000

Highlights
Australia is the
largest producer of
Bauxite in the world
India is ranked 5th in
terms of Bauxite
production and 7th in
terms of Aluminium
Production 2013 in Thousand tonnes
production
80000
70000
60000
50000
40000

Guinea

17000

Jamaica

9500

Russia

5200

Kazakhstan

5100

30000
20000
10000
0
Australia

Source: www.world-aluminium.org/statistics

China

Brazil

Indonesia

India

Guinea

Jamaica

Production 2013 in Thousand tonnes

Russia Kazakhstan

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Major Aluminium Producing

Country
Production in
Key Highlights
Countries
Thousand
Tonnes(2013)
USA

1950

Argentina

460

Australia

1750

Bahrain

890

Brazil

1440

Canada

2900

China

21500

Germany

400

Iceland

825

India

1700

Mozambique

560

Norway

1200

Qatar

600

Russia

3950

South Africa

820

United Arab Emirates

1800

Other Countries

4650

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India ranks 7th in global aluminium production.

Per capita aluminium consumption in India is 1.3
Kg Vs. global average of 8 Kilograms annually
Per capita aluminium
consumption in Kilograms

Source: www.unctad.org

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Leading Global Importers of

Aluminium

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Imported Quantity (in tonnes)

Importers

2010

2011

2012

2013

World

4,14,93,310

4,40,93,219

3,56,65,679

4,19,83,461

Germany

45,07,91,128

48,63,66,430

37,72,13,997

44,78,45,282

United States of America

41,68,56,033

40,65,17,984

35,52,99,267

40,65,74,383

China

24,91,07,073

24,51,52,325

21,35,77,149

22,56,02,852

Japan

22,77,19,865

23,12,98,154

18,49,12,110

19,90,11,585

Netherlands

20,48,21,508

22,12,54,791

16,38,40,295

19,40,96,235

18,000

17,281

15,689

16,000
14,000
12,000
10,000

8,705

7,679 7,489

8,000
6,000
4,000
2,000
0

Germany

Imported value in 2013 in '000 USD

United States of America

China

Japan

Netherlands

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ding Global Exporters of Aluminium

Exported Quantity (in tonnes)

Exporters

2009

World
China
Germany
United States of America
Canada
Netherlands

2010

89,80,265

73,18,755

74,70,218

4,79,274

7,51,379

9,39,774

8,29,900

9,00,975

6,47,442

7,95,184

9,07,745

6,97,944

7,31,743

4,21,978

5,48,242

6,53,644

5,68,851

5,86,618

3,33,744

4,61,299

5,00,000

3,82,058

3,83,130

2,92,284

4,01,866

4,52,548

3,25,825

3,35,792

20,000
16,278
13,050

8,523

7,470

5,000

Exported value in 2013 in '000 USD

China

Germany

2013

77,71,712

20,043

10,000

2012

57,92,689

25,000

15,000

2011

United States of America

Canada

Netherlands

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Analysis of International Trade of

Top Importers
Aluminium
Germany

USA

Imports are
driven by the
thriving
German
automobile
industry
Exports of
German
automobiles is
rising
especially due
to growing
demand in
developing
countries

Car and truck

makers in USA
are using
more
aluminium in
their vehicles
than before
Aerospace
OEMs as well
as renewed
growth in
construction
and housing is
also driving
imports

China

Worlds
largest
consumer of
aluminium
Transport and
construction
industries
jointly account
for over 50%
of total
aluminium
consumption
Large
production of
consumer and
Exports of Vehicles industrial
goods

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15

10

Mexico

United States of America

Japan

Germany

Japan
Imports
aluminium
structures and
unwrought
aluminium
mainly from
China
Automobile
industry and
construction
sector are the
main
consumers
Imports have
declined due to
reduction in
production
from
electronics and
automobile
industry

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Analysis of International Trade of Aluminium

Top Exporters
China

Germany

USA

Canada

High prices in
Primarily
40% of
USA is the
LME have
exports to
exports
largest
encouraged
European
comprise of
export
exports
Union
scrap metal
destination
countries
to China
Tax rebates
Exports
Austria is the
Aluminium
on exports of
comprise
some
key importer
articles like
mainly of
aluminium
of scrap
plates,
scrap metal,
items has
metal, rods,
sheets and
metal alloys
encouraged
sheets and
bars were the
and crude
exports
profiles.
major export
metal
Exports from UAE
items
Largest
have been rising
producer
of and waste aluminium is on Key export
steadily over years
Trade of scrap
aluminium
countries
the rise post 2008
with exports to
were
Mexico
Exports of Aluminium waste and scrap
Global recovery is driving over 120 countries
and China
Unit : US Dollar thousand
the demand for grey metalcurrently
16000000
14000000
12000000
10000000
8000000
6000000
4000000

Rise of prices after a steep

decline post 2011 has
resulted in normalisation
of inventories across
smelters worldwide

2000000
0

Increasing activity in
transportation and
construction industry is
responsible for rise in
aluminium consumption

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Major Global Trading Exchanges

London Metal
The London Metal
Exchange

Exchange (LME) is the

oldest and largest
market for non-ferrous
metals
It was founded in the
year 1877 and has over
US$ 11 trillion of metal
contracts traded in 2010
It is the biggest Futures
Services
offered
and Options
traded for
exchange for Trading
Base and
Aluminium
metals
other
Contracts
and Trading
Transparent Pricing and
Price Realization
Risk Management
Tools
Warehousing and
Delivery
Branding
Regulation
Arbitration

Price of Aluminium on London Metal

Exchange

Source:http://www.lme.com/metals/nonferrous/aluminium/#tab2

Contract types and their details on

LME
Contract
Metal
Lot
Price
Size

fluctuati
on

Physical

Aluminium
Ingots

25
tons

$0.01

Futures

High Grade
Primary
Aluminium

25
tons

$0.50

Options

High Grade
Primary

25
tons

$0.01

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Major Global Trading Exchanges

Price of Spot Aluminium in $/lb in
41821

New York Mercantile

Exchange
The New York Mercantile
Exchange is a commodity
futures exchange
established in 1872 and
owned and operated by CME
Group of Chicago
It is the third largest
Aluminium Trading
exchange
Shanghai
Futures
in the world
The
Shanghai
Futures
Exchange
Exchange was formed from
the amalgamation of the
Shanghai
Metal
Exchange,
Shanghai
Foodstuffs
Commodity Exchange and the
Shanghai
Commodity
Exchange in December 1999
The exchange was ranked
13th among world derivatives
exchange by the Futures
Industry Association in 2012,
with total volume of 365.3

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NYMEX

0.88

41791

0.82

41760

0.78

41730

0.81

41699

0.78

41671

0.77

41640

0.77

41609

0.78

41579

0.79

41548

0.82

41518

0.8

41487
0.7

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$/lb

0.82
0.72

0.74

0.76

0.78

0.8

0.82

0.84

0.86

0.88

0.9

Price of Spot Aluminium in $/lb

Source:http://www.kitcometals.com/charts/aluminum_historical_lar
ge.html

Aluminium Spot prices on SME

1400
1200 1175

1180

1145
1035

1000

900

880

800

740

600
400
200
0
40969

41030

41091

41153

41214

41275

41334

Aluminium Spot prices on SME

Source:http://www.metal.com/Upload/en//publication/files/1407235546_19

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Historical Price Graph for

Aluminium

Price Forecast of
Aluminium
Year
2014
2015
World
Price (in
US$/tonn
e)

1,810.
8

2153.
8

2016

2017

2018

2283.
3

2300.
0

2350.
Growth
0

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Analysis

Aluminium averaged
1751.69 from 1989 until
2014, reaching an all time
high of 3271.25 in July of
2008 and a record low of
1022.70 in November of
1993 (All prices in
$US/tonne)
Price of aluminium declined
considerably to
approximately 1200-1300
$US/tonne in 2008 due to
the global crisis and
recession.
It recovered since then but
due to the sluggish growth
around
the world the
Prospects of
Aluminium
recovery has been slow
Aluminium prices are
expected to rise in future
because of the increasing
demand of aluminium in
the world.

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Fundamental Analysis of
Aluminium
Supply side Analysis

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World production of aluminium has increased

with a steady pace during the recent years
Demand for aluminium has been very high in
the construction and the automobile sector

Supply Drivers

Transportat
ion

Transportation is the most important

sector for aluminium as it is
increasingly replacing iron and steel
in cars, trucks and airplanes

Cost Factor

Bauxite is the raw material used to

make aluminium
The electrolytic process of turning
alumina into aluminium is very power
intensive one of the highest in
metals - and so energy is a very big
cost driver

Packaging

Aluminium beverage cans and food

containers are made of aluminium foil
and their usage is growing
Non-residential construction like
office buildings furniture etc are
growing at a small rate

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Global Aluminium Production Analysis

Key Factors Influencing
Production Levels

Cheap
Power

Bauxite
Availabil
ity

Lots of power
required in smelters
for converting
Alumina to
Aluminium
Main driver for
production from
Middle East and
North West China
High bauxite exports
from Australia and
Indonesia
China produces
nearly 1/3rd of its
Aluminium from
imported bauxite

Abundant gas
and gas based
power
available in
Middle East
Greenfield
Projects
coming up in
NW China due
to cheap coal
Smelter
closures in
Europe due to
Carbon Tax
leading to
declining
production

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Key Production Drivers

Transport Sector is the main consumer
Thrust towards light weight bodies to increase
mileage
US EPA guidelines to reduce vehicle exhausts by
reducing weight
Companies emphasising on lightweight railway
bogies to reduce environmental impact and high
quality exterior finish

Construction and Electrical Industry

Corrosion resistance, Recyclable, Lightweight and
Durable
High copper prices prompting switch to aluminium
in electrical and industrial components
Primary building material in LEED buildings and
Sustainable Buildings

Packaging Industry
Rising use of aluminium foil in food preparation,
insulation and electronics
Lightweight package creation by merging of
aluminium foils with flexible films

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Supply

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Global Commodity Balance Sheet

2011 Q4 2012 Q2 2012 Q4 2013Q2 2013 Q4 2014 Q1
Framework

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Unit- Thousand Metric

Tonnes

World
Demand
North
America
East and
Central
Europe
West
Europe
Asia

2014 Q2

11,567

11870

12171

12540

12910

12774

12,890

1,277

1,202

1,247

1,257

1,188

1,158

1,143

1,104

1,082

1,071

1,026

940

924

937

1,005

903

881

879

892

853

870

5,100

5,524

5,775

5,928

6,439

6,340

6,338

The World Demand Data For Aluminium

TotalforQ12010 to Q22014:212,195thousand metric tonnes

Sourceof
- www.world-aluminium.org
aluminium