Indian aluminium producers are set for a bumper year as they look forward to better realisations, driven by a global aluminium market deficit caused by the ongoing West Asia conflict.

Crisil, in a recent report, said that the deficit is likely to drive aluminium prices to all-time highs. Record high prices and efficiencies derived in manufacturing are likely to push the profitability of Indian aluminium producers to over $1,450 EBIDTA per tonne in financial year 2026-2027, which will be the highest in over a decade.

Indian producers have managed to bring down their cost of production owing to highly integrated operations, including captive power generation, an alumina refinery, and bauxite linkages. These factors, along with impressive capacity utilisation, are expected to result in strong cash accruals and stronger credit profiles, the analytics firm said.

Crisil added that it studied three domestic primary aluminium producers, who account for almost 90% of India's 4.6mn tonne (MT) capacity.

The deficit being seen in the global market has been triggered by curtailment in production in the Gulf Cooperation Council (GCC) region, which contributed almost 8.3% to the world’s aluminium production in calendar year 2025. About 40-50% of the supply in the GCC region has been disrupted due to strikes in major smelting infrastructure. The situation has been compounded by a shortage of gas supply. As such, this production disruption could increase the global supply deficit to almost a ten-year high of 1.5-2.0mn tonnes during the year.

The supply deficit has naturally fed into aluminium prices on the London Metal Exchange (LME). Since the start of the West Asia crisis in late February 2026, LME prices have averaged over $3,500 per tonne - the highest in a decade.

Ankit Hakhu, director at Crisil Ratings, says in the report that the disruption caused by the West Asia conflict is significant. “Considering the global supply deficit averaged below 0.5mn tonnes over the last five years. With global smelting capacities operating above 90% utilisation and China’s primary output already near its 45mn tonne cap, there is limited room to offset the GCC shortfall, further constrained by high lead times to commence or restart fresh production. Even in a scenario of the West Asia conflict being resolved in the next one to two quarters, this deficit is likely to keep prices elevated in the range of $3,200-3,300 per tonne through fiscal 2027,” Hakhu argues.

Most of the country's smelting capacity falls within the first quartile of the global cost curve, enabling producers to maintain strong margins and remain competitive even in challenging market conditions. The Indian players enjoy such cost advantages due to two main factors.

First, the share of captive coal-based power in their operations is bigger than that of their global counterparts, who rely mostly on gas-based power. Indian manufacturers’ power costs, which account for 40-45% of total production cost, remain stable due to soft domestic coal prices amid robust coal production in the country. Additionally, because the power plants are co-located with their smelters, the Indian manufacturers are insulated from the volatility in the global gas market.

Second, India has comfortable bauxite availability locally and strong backward linkages for alumina production to meet 85-90% of requirements. Raw materials account for about 30-35% of total production cost, and healthy availability shields domestic producers from raw material volatility, Crisil says.

In addition, Indian manufacturers will get further support to their steady cost curves as their other overheads, like fixed-cost components, have lower variability than coal and alumina costs. As a result, the overall cost of production is expected to hover in the range of $1,900–1,950 per tonne for integrated Indian producers in FY2026-2027, compared with an estimated $1,865 per tonne during fiscal 2026.

Ankush Tyagi, also a director at Crisil Ratings, says in the report, "The key advantage Indian producers hold in this milieu is their self-sufficiency in key raw material availability for primary aluminium production. Unlike GCC smelters, Indian players rely mainly on domestically sourced raw materials like coal and bauxite. Thus, a sharp increase in realizations will push operating margins of Indian primary aluminium producers above $1,400-1,500 per tonne this fiscal — well above the decadal average of about $560 per tonne."

The improvement in operating margins also comes as Indian manufacturers complete capacity expansion programmes undertaken to meet robust domestic demand, which is projected to grow by 7–9% this fiscal year, driven by increasing electrification and electric vehicle (EV) adoption. Additionally, there is likely to be an improvement in the export front as well, particularly from buyers in Europe, Japan and the US, who earlier bought aluminium from GCC suppliers.

Despite fresh capacity additions across the domestic market, utilisation levels are expected to remain robust at 85–90%, supported by these favourable demand and operating conditions, and as a result, operating cash accruals of Indian manufacturers are also estimated to hit a decadal high in FY2026-2027.