India's secondary aluminium industry is facing a raw material shortage after Middle Eastern nations banned scrap exports. With 80% of requirements met via imports, companies are now looking to costlier alternatives in the Americas and Southeast Asia. This shift may increase production costs and pressure profit margins for domestic manufacturers.
Detailed Coverage
The secondary aluminium industry in India is navigating a difficult supply disruption following a ban on aluminium scrap exports from key Middle Eastern nations. This policy change, which took effect on June 10, has forced Indian importers to rapidly seek alternative sources of raw material to maintain factory production.
Impact on Supply and Costs
Secondary aluminium producers rely heavily on imported scrap to feed their furnaces for manufacturing parts for the automotive, construction, and consumer goods sectors. Official trade data for 2025-26 highlights the scale of this challenge: India imported 2.02 million tonnes of aluminium scrap, worth Rs 40,203 crore. The Middle East provided about 0.40 million tonnes, or roughly Rs 9,103 crore, of this volume. Replacing this supply from distant regions like South and Central America or Southeast Asia introduces logistical hurdles, including higher freight costs and longer transit times.
Sector Challenges and Competitive Pressure
Industry representatives, including the Material Recycling Association of India, have expressed concern that the sudden loss of a primary supplier may drive up raw material prices. Adding to this pressure is a 2.5% import duty currently levied on aluminium scrap. Because this duty is not applicable in several neighboring countries, Indian manufacturers face a competitive disadvantage. While the Ministry of Mines has reportedly suggested that the Ministry of Finance remove this duty to help the industry, no official change has been implemented yet.
Investor Monitorables
For investors, the primary concern is the potential for narrowing profit margins among companies that rely on secondary aluminium. If manufacturers cannot pass on the increased landed cost of raw materials to their customers, their financial results may show lower operating margins in the coming quarters. Investors should track whether companies can successfully pivot their supply chains without significant cost overruns or production delays. Additionally, any updates from the government regarding the 2.5% import duty will be a critical factor for the industry’s cost competitiveness. The market will also look for management commentary in future earnings calls regarding how these procurement shifts affect their inventory levels and production capacity utilisation.