Indian secondary aluminum producers are experiencing a 'raw material crisis' triggered by the Middle East conflict. Highly reliant on imported scrap, Indian aluminum companies are facing a double blow of supply interruptions and soaring costs — since the outbreak of the Iran war, scrap aluminum prices have jumped nearly 30%, forcing some companies to cut production by 20% to 40%.
India is one of the world's largest importers of aluminum scrap. Nearly half of the country's 4.2 million tons of aluminum production comes from the secondary production sector, with around 30% of its scrap supply dependent on the Middle East. The general manager of Ahmedabad-based leading producer G.R. Metalloys stated that plant inventories are already in a 'hand-to-mouth' tight situation, with most companies' inventories depleted.
The ripple effects of this crisis are quickly spreading to the automotive industry — Maruti Suzuki, Tata Motors, Mahindra, and Hyundai India together consume about 60% of the domestic secondary aluminum output.
Metco Ventures' managing partner warned that the squeeze on scrap supply has already affected prices and will eventually be transmitted layer by layer to automakers and even end consumers.
The Society of Indian Automobile Manufacturers had already warned earlier this month that the Middle East conflict could lead to production interruptions and rising input costs.
Adding to the industry's woes, India currently imposes a 2.5% import duty on scrap aluminum. Recycling industry organizations have requested the Prime Minister's Office to cancel this duty. The Secretary of the Ministry of Mines stated that the government is studying the industry's appeal.
Meanwhile, a European industry lobbying group has also requested India to exempt the 10% import duty on glass bottles and aluminum cans due to shortages caused by the Iran war — the country has already seen shortages of sugar-free cola sold solely in aluminum cans.
