MUMBAI India's aluminum exports could rise 5 percent in the current fiscal year to 325,000 tonnes, despite a slowdown in global demand, a senior industry official said, as falling prices have led rival global producers to cut production.
Declining aluminum prices have forced major players such as Alcoa (AA.N) and Norsk Hydro (NHY.OL) to cut output and have prompted China, the world's largest consumer of the metal, and Japan to ramp up purchases.
"Due to the sudden closure of some of the smelters in the U.S.A., the export demand has slightly improved," Mukesh Kumar, president of Vedanta Aluminum Ltd, India's largest aluminum producer, said in an interview.
Vedanta Aluminum, a part of billionaire Anil Agarwal-controlled Vedanta Group (VED.L), produces about 40 percent of the South Asian nation's total output.
India exported 310,000 tonnes of aluminum in 2011/12, he said.
Aluminum prices have fallen this year alongside other metals as the global economy has cooled. The benchmark three-month LME aluminum contract on Friday, at $1,846.25 per tonne, was down 22 percent from its year-high in March.
Indian aluminum exports to South Korea, Japan and China are currently priced at a premium of $223-$230 per tonne above the LME benchmark, lower than the $240-$260 premium from other countries, traders said.
Low costs and availability of better grades of inputs such as bauxite give Indian smelters an edge over other suppliers, but bureaucratic and environmental delays have limited the availability of coal, a major fuel for aluminum production.
"The capital expenditures and operating costs in India's plants are nearly 70 to 80 percent of the world average cost due to high-quality bauxite, rich coal deposits and low labor costs," Kumar said.
"India is blessed with high quality bauxite and coal but the delay in processing of applications (for allotting mines) is the main cause of concerns," he added.
India produces around 1.6 million tonnes of aluminum and consumes about 1.3 million tonnes annually.
Its domestic demand is poised to grow by 7 to 8 percent a year, led by its power transmission, construction and automobile sectors.
(Editing by Nidhi Verma and Jane Baird)