Emerging Markets : Aluminum Industry Bucks Global Trend


Data released by the Indian governments Central Statistical Organization (CSO) show that the Indian economy grew by 8.9% in the April-June 2006 quarter. A large portion of this strong growth has come from the manufacturing sector, which grew by 11.3%. Indias economic growth in recent years has been powered by services, especially information technology-based, but manufacturing growth has been adding to the momentum.

While IT and banking have been the usual growth drivers, for the past few quarters the trade, transport, travel and communication sectors have also helped considerably. According to the CSO, this segment grew by 13.7% for the April-June 2006 quarter compared with 11.7% in the corresponding quarter last year.

The rapid growth in Indian manufacturing is prompting significant capacity additions, especially in the metals industry. The National Aluminum Company (NALCO), which is publicly listed but controlled by the government, has announced a $3.5 billion greenfield expansion project where it will increase its alumina refining capacity by 1.5 million tons annually and will also build a new 2.5 million-ton aluminum smelter. The new construction bucks a global industry trend toward consolidation. India, which has significant deposits of bauxite, is one of the few places where capacity is growing, with other private-sector players such as Hindalco and BALCO already having announced new plants.

Indias Tata Steel also showed ambitious expansion plans, confirming that it was considering a bid for Anglo-Dutch steel producer Corus.

The country is also becoming a global manufacturing hub for small cars and is increasingly becoming a popular manufacturing destination for multinational auto companies. Mitsubishi recently announced it would build a new plant on Indias west coast to manufacture 400,000 cars a year entirely for the export market. Currently, Hyundai Motors is Indias top small-car exporter, with more than 100,000 cars sent overseas annually from its plant located on the east coast. Hyundai has already announced expansion plans to double exports to 200,000 cars.

Aaron Chaze