The base metal industry is a critical pillar of India’s economy driving growth, generating employment and supporting key market sectors. Base metals are indispensable in fields ranging from aerospace and defence to railway and healthcare equipment manufacture. In fact, aluminium alone contributes to 2 per cent of India’s manufacturing GDP.

Against this backdrop, the global base metal industry is in a state of flux. Prices of these core metals have risen by around 12-14 per cent in the first seven months of FY2025. Ind-Ra also expects base metal prices to continue rising in FY25.

For many countries, this price surge poses challenges because it stems from low inventories, supply chain constraints and higher raw material costs. These challenges lead to increased production costs, which impact the cost of finished goods, posing hurdles even for India. However, we have certain strategic advantages like cost-effective production capabilities, robust domestic demand and supportive government policies that give the domestic base metal industry a unique edge to navigate these pressures.

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Why global price hikes can be a windfall for India’s base metal industry?

The global base metal price rise presents a rare opportunity for India’s corresponding industry. With its competitive advantages, India is well-positioned to turn these trends into tactical wins.

Domestic demand as a pillar of stability

India’s base metal industry enjoys strong domestic demand. Infrastructure expansion driven by government initiatives such as PM Gati Shakti and Smart Cities Mission ensures a steady requirement for base metals.

Aluminium can be a focus area here. ICRA has predicted a steady demand growth of 9 per cent for this metal in the next two fiscal years. This widespread domestic consumption can be traced back to aluminium’s versatility, which makes it a preferred choice in various industries from mechanical engineering and defence to railways and aerospace.

However, to meet this demand seamlessly, India must remain self-sufficient and capitalise on its abundant reserves of aluminium, copper and other key metals. By fostering an ecosystem that supports local mining and production, India can reduce reliance on imports and build a more resilient supply chain.

Industry collaborations and R&D in areas like aluminium recycling and sustainable mining practices are also critical to creating a robust infrastructure. This not only strengthens India’s domestic capabilities but also reduces waste and aligns with global sustainability goals. Exports, then, become a layer of additional benefit rather than a primary reliance and help balance self-sufficiency and global trade.

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India’s competitive advantage amid rising costs: Cost-effective manufacturing

Despite rising prices, cost-effective production gives India a crucial edge in the global market. Affordable skill sets, competitive energy tariffs and proximity to raw material sources collectively ensure that Indian manufacturers deliver cost efficiencies that few global players can match.

India’s exceptional operational efficiency is another critical differentiator. Aluminium and zinc smelters, for instance, operate at over 90% capacity utilisation a testament to the sector’s capability to sustain high output levels. This ensures a degree of operational predictability that enhances India’s reputation as a dependable exporter.

The current scenario presents a strategic imperative: Indian manufacturers must deepen their presence in foreign markets by offering value-added products and leveraging free trade agreements.

Higher prices translate to higher revenues

Copper prices rallied to a 22-month high in April 2024. Aluminium prices surged from $2,200 to $2,500 per tonne. The overall base metal costs edged higher recently with the Fed’s incoming rate cuts decision. These surges present significant opportunities for Indian producers because each sale now contributes substantially more to the bottom line. Indian base metal producers can maximise this opportunity by boosting exports while prices remain elevated.

Beyond individual companies, the Indian economy as a whole stands to benefit from this development. Higher export earnings strengthen India’s economic resilience because every additional dollar received leads to a more favourable balance of trade. In FY2024, for instance, aluminium exports earned India over $7 billion in FY24. This provided a significant offset to India’s $132.4 billion crude oil import bill.

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Positioning India as global Leader in base metal segment

With India’s base metal industry poised to solidify its standing as a global leader, aluminium takes centre stage – as a key growth driver – as the country is already positioned as its second-largest producer globally. This growth trajectory is further supported by government initiatives like Make in India, which prioritise domestic manufacturing, reduce import reliance and boost exports. Infrastructure projects like Bharatmala and UDAY also drive sustained demand for base metals domestically.

As India continues to explore its full potential in base metal production, the benefits extend beyond national borders. Increased local mining, production and recycling efforts will not only boost India’s economy but also help stabilise the global base metal market by addressing supply constraints.

By capitalising on our strengths, expanding our leadership in aluminium and integrating innovation into the value chain, India is not just adapting to global price dynamics it is rightly poised to emerge as a leader in the metals industry of tomorrow.

The author is MD & CEO at Taural India