Domestic Aluminium Makers To Remain Profitable In FY26, Despite Tariffs: CRISIL

For India, the surge in tariff from 2.55 per cent to 25 per cent will have a limited direct impact as the US accounted for under 5 per cent of India's aluminium exports over the past 5 fiscal years.

Indian producers may face heightened competition in their regular overseas markets, as key exporters to the US divert supplies to other geographies.

Source : Freepik

The profitability of domestic primary aluminium manufacturers is likely to remain healthy in the current financial year despite some moderation amid global headwinds, including higher US tariffs, Crisil Ratings on Wednesday said.

The US raised the tariff on aluminium imports to 25 per cent for all countries. For India, the increase in tariff from 2.55 per cent to 25 per cent will have a limited direct impact as the US accounted for less than five per cent of India's aluminium exports over the past five financial years.

"The robust profitability will support healthy operating cash flow required for the ongoing capital expenditure (capex) by domestic primary aluminium players and will keep credit profiles comfortable," it said in a statement.

Nonetheless, with nearly 50 per cent of the country's annual primary aluminium output exported, Indian producers may face heightened competition in their regular overseas markets, as key exporters to the US divert supplies to other geographies. Despite this, trade volume is unlikely to be drastically disrupted, given the historical tight match between global primary aluminium demand and supply, which is expected to continue this fiscal as well, it said.

"While global demand growth may moderate this fiscal, surplus will still be limited. This is because the global aluminium market faces limited risk of oversupply, as smelters in major aluminium-producing countries, including India, have consistently operated at utilisation rates well above 90 per cent.

Moreover, there is limited primary aluminium capacity in the US -- which has been relying on imports to meet over 80 per cent of its primary aluminium demand -- and setting up new smelter capacities has a long gestation period. Moreover, India’s position as one of the lowest-cost primary aluminium producers globally provides a comfortable cushion against the potential increase in competition in overseas markets," Crisil Ratings Director Ankit Hakhu said. 

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)