Published by : The Hindu
Overall, when the first quarter was a washout for most companies, Jindal Aluminium Ltd. (JAL), a leading aluminium extrusion company, witnessed rising demand from ventilator manufacturers as the spread of COVID-19 necessitated the use of this vital equipment at hospitals to save the lives of critical patients. However, the overall demand scenario remained muted, said Pragun Jindal Khaitan, vice chairman and managing director of the ₹3,000 crore manufacturer of aluminium extrusions and aluminium flat-rolled products. Edited excerpts:
What is the impact of COVID-19 on the company and what is the outlook?
COVID-19 has impacted almost all sectors. Due to the falling market demand, and restrictions, our production was limited and there was a reduction in the overall output in April and May 2020.
Whereas, June has turned out to be positive in terms of revival as we witnessed a 65-70% rise in demand, on an average. During this period, our exports have neither increased nor decreased significantly…it has been between 15-20% of the total output.
The upsurge in the manufacturing of ventilators triggered by COVID-19 cases led to a new segment demand of aluminium extrusions. These aluminium extruded products support functions of a ventilator in one way or the other. Approximately, we [have] supplied more than 100 MT of these products till now. From here, as the economy opens, we only see an increase in demand.
How have global supply chain disruptions affected Indian firms and importers?
The disruption in the global supply chain has impacted the manufacturing of downstream aluminium products, but it has not stopped production completely.
Downstream aluminium products are mainly manufactured in line with demand. Due to the current pandemic, the global primary aluminium market has witnessed a significant amount of inventory build-up, while the demand for the metal has dropped.
China, the world’s largest primary and downstream aluminium producer, has an export duty on primary aluminium and a subsidy on downstream aluminium exports. This has led to Chinese downstream manufacturers supplying inexpensive products to the international market and at the same time supporting their domestic primary aluminium uptake.
Measures like cutting down the duties on primary aluminium and an increase in the import duties on downstream aluminium will help boost the Indian downstream aluminium sector.
How is poor demand from the auto and real estate sectors reflecting on the downstream industry?
Before the pandemic, the Indian extrusion segment was growing at a CAGR of 7-7.5% as compared to the global aluminium market growth of 5.5% CAGR. An approximate growth of about 52-55% was also anticipated in the auto sector. This is because the average aluminium usage in passenger cars in India is less (about 2-3%) compared to other countries like the Europe and USA (which are at about 12 kg per car).
As far as real estate is concerned, it also accounted for a significant part of the total demand in the downstream aluminium segment. The prevailing pandemic situation has drastically impacted the demand as major sectors and other allied industries like building and construction, automobile and electrical have not been able to operate to their capacity.
Building and construction and automobile sectors have been the largest consumers of aluminium. Any thrust to these sectors will have a direct bearing on aluminium consumption and support employment.
Likewise, is the slump in the construction industry squeezing the downstream segment?
Building and construction constitute a significant part of the overall demand in the downstream segment. The main use of the metal in this sector is to offer materials for roofing and cladding, production of windows and door frames, as well as small applications like shutters, door handles, and ceiling partitions to name a few.
It is needless to say that due to the current lockdown situation, the construction sphere was unable to operate to its fullest capacity.