As part of my ongoing efforts to highlight potential growth industries in India, this week's column will look at India's aluminium industry.
Aluminium is a "young" metal, in the sense it has only been produced on an industrial scale since 1886. That year, Hall and Heroult independently discovered how to produce aluminium through electrolysis.
Aluminium has come a long way - from a production level of just 1,000 tonnes in 1900 to about 32 million tonnes today.
It has become the second most widely used metal in the world - in a period of just over a century.
It is used widely in such fields as construction, transportation, packaging and electronics. Globally speaking, about 26 per cent of production is consumed by the transportation industry, 20 per cent by the construction industry, 20 per cent by the packaging industry, and 9 per cent by the electronics sector.
The aluminium industry provides employment to over 1 million people directly and another 4 million people indirectly.
In India, aluminium production began in the year 1938 when the Indal Aluminum Company (Indal) was set up in collaboration with Alcan of Canada.
Indal initially had a production capacity of 2,500 tonnes per annum (tpa). The industry has grown many times since then.
India's aluminium consumption follows a different pattern than much of the world. About 31 per cent of production is consumed by the electrical sector, 18 per cent by the transport sector and 12 per cent by the packaging sector.
The primary raw material used in the production of aluminium is bauxite. India has huge bauxite reserves. They give Indian producers a cost advantage over other producers.
Aluminium production also requires calcined petroleum coke, aluminium fluoride and fuel oil. India has access to sufficient amounts of all three to support its aluminium industry.
Aluminum demand in and outside India was high in 2004 and is expected to increase this year also. Accompanying the higher demand has been higher prices. The price of aluminium reached a record high last year, and prices are expected to be strong this year too.
The writer heads the Dubai office of Karvy Stock Broking Ltd.
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