Aluminium Manufacturers Profitability May Remain Robust in FY26: Crisil

Crisil Ratings stated on Wednesday that the profitability of domestic primary aluminium producers is expected to stay strong in the current financial year, even with some easing due to global challenges, such as increased US tariffs. The United States increased the aluminium import tariff to 25 percent for every country. For India, the rise in tariff from 2.55 percent to 25 percent will have a minimal direct effect since the US represented under five percent of India's aluminium exports in the last 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.

However, since nearly 50 percent of the nation’s yearly primary aluminium production is exported, Indian manufacturers might encounter increased competition in their usual foreign markets, as major suppliers to the US redirect shipments to different regions. Nonetheless, trade volume is not expected to be significantly affected, considering the historically close alignment between global primary aluminium demand and supply, which is projected to persist in this fiscal period as well, it reported

"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 percent. 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.