india al foil report 2006

8/4/2019 India Al Foil Report 2006

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6 Metalworld � January 2006

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Aluminium foil consumption in the

Indian states like Maharashtra,

Karnataka and Kerala has grown up

dramatically by about 50 per cent in

anticipation of the proposed ban on

use of plastics in these three states.

The thin gauge plastic bags

(polyethylene bags) upto 8 microns are

proposed to be banned in the

aftermath of the deadly flood in the

economic capital of the country which

caused the life and business to almost

standstill for about 36 hours in

Mumbai thus causing a loss of

about Rs 4-billion to the Indian

economy. Foils since then haveacquired prominent place in kitchen

thus witnessing a growing of about

40 per cent as compared to 20 per

cent before the flood. Dominated

by the likes of Hindalco, the kitchen

foil industry is estimated to be in

the region of about Rs 320 million

and is categorized as being in the

nascent stage. The market is

doubling every year with the change

Aluminium foil on roll

in product and consumer patterns.

History has it that aluminium foil use

in the kitchen was confined to the

upper class people till recently but the

product is now more far-reaching.

Aluminium foil forms only 0.5 per

cent of total aluminium available. Still,

it occupies prominent place in the

flexible packaging industry mainly due

to its virtues. Industry wants the

material to come back after use for

recycling even if the process is

commercially unviable.

Duopolised IndustrDuopolised IndustrDuopolised IndustrDuopolised IndustrDuopolised Industr y y y y y

Indian aluminium foil industry has

duopolised since Hindalco acquired

Indian Aluminium (Indal) and India

Foils came under Sterlite

Management. Hindalco/Indal and

Sterlite/India Foils have controlled the

aluminium foils market entirely be it

production, marketing or exports front.

The duo has been producing a

substantial part of the total

consumption of aluminium foil in the

country. The two Aditya Birla Group

companies jointly produce in excess

of 25,000 tonnes of aluminium

foils while Sterlite and India Foilsmanage to produce around 12,000

tonnes per annum. The leader of

early nineties, India Foils have cut

down its production after closing

down one of its foilstocks producing

units in Kolkata. The management

of Sterlite decided to procure

foilstocks from its group company

Bharat Aluminium Company till

aluminium foil market is not



Metalworld � January 2006 7

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maturing. Secondly, despite having

huge demand of aluminum foil, theSterlite management decided not to

revive its foilstocks unit and

asked the company to

strengthen its financial

position on its own. The

message seems to be clear

that Anil Agarwal is not in

the mood to infuse funds in

such a perspective entity.

Therefore, with the

aforementioned plant

closure, the total capacity

of the company came down

to 12,000 tonnes from

20,000 in the beginning of

21 centuries. India Foils

have introduced foils upto

as thin as 6 microns which it claims

as the thinnest in India.

Hindalco’s foil unit is located at

Silvassa, Dadra and Nagar Haveli, hasan installed capacity of 5000 tpy with

foil thickness varying from 7 microns

to 200 microns and an average

thickness of 45 microns. Indal has a

6000 tonnes foil production capacity

at Kalve in Maharashtra. In the last

few years, the company has multiplied

production several times looking at

market demand and several tax

benefits, the company has been

availing from the regional government

due to setting up plants in rural area.

In 1999-2000, the production jumped

to 7000 tonnes while the same

mounted to 16,700 tonnes in 2001-

02. The foil production of the company

swelled to around 20,000 tonnes in

2002-03. Hindalco’s aluminium foil

production during 2003-04 shot up to

18,560 tonnes and 26,177 in 2004-

05.

From the table it can be seen that

the kitchen foil production has beenturbulent by Hindalco.

Sterlite, another major aluminum

foil producer, has been very keen on

foil producing. The group was,

sometimes in the past, owning a cablewrap foil project with a capacity of

4000 tonnes but due to high rise in

raw materials cost and difficulty in

obtaining them pushed the plant into

doldrums. Consequently, the plant is

idled now. On the other hand, since

the group has recently taken over

Bharat Aluminium Company which may

help supply raw material at affordable

price due to having downstream

processing unit in house, the possibilityis that the group may rethink for

aluminium foil

production at the

idled plant or

enhance the

existing capacity of

India Foils looking

at the huge

potential lies in

the business.

There is a huge

possibility that the

company may opt

for obtaining raw

materials from its

own plant rather

than to buy from

Bharat Aluminium Company.

Supply-demand chainSupply-demand chainSupply-demand chainSupply-demand chainSupply-demand chain

Foils is a very thin sheet of rolledaluminium supplied in its pure form

(commercial purity) or in a variety of

alloys and tempers which give a wide

choice of tensile properties. The

thickness of foil ranges from the

thinnest currently produced

commercially at about 0.0065 mm

(6.5 micron) to the defined upper limit

of 0.2 mm (200 micron). Material

thicker than 0.2 mm is defined as

sheet or strip. According to Indal, the

total estimated capacity of the industry

is 68,000 tonnes including cable wrap

while the same is 61,000 tonnes

excluding cable wrap. But,

consumption has always been lower

than the production causing surplus in

the industry. The total consumption of

aluminium foils is around 56,000

tonnes including cable wrap and

23,000 tonnes excluding cable wrap.

Period Foil production

in metric tonnes

Q3 04 4664

Q4 04 4833

Q1 05 6523

Q2 05 7302

Q3 05 5331

Q4 05 6482

Q1 06 6084

Q2 06 7809



8 Metalworld � January 2006

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The industry exported about 4000-

5000 tonnes of aluminium foils in2002-03 which was shot up to 6000

in 2003-04 and about 6500 tonnes

in 2004-05.

Physical demand remained

constant till 1990 because of several

obstacles in the form of taxes and lack

of awareness about its chemical

properties. But, since globalization the

demand has multiplied several times

following improvement in standard of

living among middle class. Application

of aluminium foils mainly for hygenic

purpose was previously confined to

wealthier persons for their daily and

casual purpose which is now spread

among middle class as well.

Threat from competitorsThreat from competitorsThreat from competitorsThreat from competitorsThreat from competitors

Aluminium foil is principally used

as a high performance barrier in the

packaging of foods, pharmaceuticalsand toiletries, and also in decorative

applications in bottle labelling and in

confectionery packaging. Its end-use

applications include: chocolate

confectionery wrap, lidding for plastic

tubes and pots - particularly in the

diary sector - and for instant dried

soups both as unsupported foil and

laminated to other material such as

paper, lidding material for

pharmaceutical blister packs, paper/

foil/film laminated in sachets for dried

soups, causes etc., vacuum-packed

coffee and as a laminate in aseptic

liquid car tonnes in gauges of 6-7

microns. However, it is clear that the

development of polymer technology,

plastic film is now able to replace

aluminium foil in many of its

traditional applications. Among the

new developments, the metallocene

technology, high-barrier films and

active packaging. Aluminium foil hasthreat mainly from BOPP, polyethylene,

polyamide, PVC and cellulose. But,

none of the competing materials has

the same properties as aluminium foils

have. Still, these competing materials

will affect the overall consumption of

aluminium foils. Therefore, if the

government of India bans on thin

gauge of polyethylene, the demand of

aluminum foil would go up by 100 per

cent.

Reynolds and FreshwrappReynolds and FreshwrappReynolds and FreshwrappReynolds and FreshwrappReynolds and Freshwrapp

The launch of “Reynolds” brand

aluminium foil by Alcoa brought a new

fillip to the aluminium foil market in

India but soon the dream of Alcoa

collapsed with the Indian sentiment of

buying good product at cheap price.

Reynolds which was offering 6 meters

of aluminium foil at about 10 per centhigher price of existing “Freshwrapp”

foil of 9 meters. “Indians use

everything from paper napkins to

newspapers to wrap food. We plan to

change that,” Douglas Cohen, general

manager Asia Pacific, Alcoa Inc had

said at the launch of Reynolds in India.

Alcoa was hoping to have 25 per cent

share of the Rs 320 million aluminium

foil market by 2006. At the launch

Reynolds had tied up with Optimum

Marketing Metrics (OMM) which is also

the sole distributors for Hersheys,

Master Foods, Crayola and Dole juices

in India. The product will be launched

in a phased manner starting with

Delhi, NCR, Chandigarh and other

selected cities in North India. In the

second phase, Mumbai and other

southern metros were planned to be

tapped.

But, the existing player Hindalco

showed maturity and enhancedextensive distribution network for its

kitchen utility products, including

aluminium wrapping foils and semi-

rigid containers (casseroles). Hindalco

enjoys with 40 market share of the

2,500-tonnes kitchen foils market.

The company is confident of growing

this market, which is still at a nascent

stage when compared to the global

size.

IndustrIndustrIndustrIndustrIndustr y outlook y outlook y outlook y outlook y outlook

All aluminium foils consumer

industries are poised for growth. Even

in difficult years of economic recession

these industries have maintained the

growth rate of 10-15 per cent.

Primarily being a close associated of

human being, industries like cigarette,

process food packaging and

pharmaceutical are expected to growfaster in the years to come and hence

a greater chance for foils growth. A

school of though expects the industry

to grow at 10-15 per cent while more

optimist analysts predict that the

industry’s current growth rate would

continue till the ban on thin gauge

plastic use is not freely permitted by

the government and by the concerned

courts. This growth will mainly be

driven by changing lifestyles rising

disposable income levels and growing

concern of health and hygiene. Total

foil market in India is predicted to reach

the height of 100,000 tonnes by

2010. If this really happens, India

would require additional capacity.

Thus, the aluminium foil industry is

poised for spectecular growth in

future.GGG

india al foil report 2006

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