At a time when Indian aluminium prices are expected to remain higher for longer due to the West Asia war—impacting industries from automobiles and beverage cans to construction and even space tech components—a key industrial chemical is fuelling manufacturing costs, with effects set to ripple across the broader economy
Rising energy costs due to the war disruptions have pushed up caustic soda prices by as much as 20% in India. Used widely across industries—from refining alumina and making paper, textiles, soaps and detergents to treating water, the chemical is now raising the cost of manufacturing aluminium for smelters run by Hindalco Industries and Vedanta Aluminium, as it is crucial in extracting alumina from bauxite ore, the primary raw material.
With a capacity of 4.1 million tonnes per annum, India is world’s second-largest aluminium producer after China.
The country is self-reliant in caustic soda. In FY25, India produced about 5,020 kilotonnes, while the domestic demand was about 4,625 kilotonnes. Around 11% of the output was exported, with about 15% of the cargoes going to West Asia.
A double whammy
Caustic soda price rise comes as a double whammy for the aluminium industry already dealing with a supply crunch triggered by the destruction of two major facilities in West Asia: Emirates Global Aluminium’s Al Taweelah production site in Abu Dhabi’s Khalifa Economic Zone and Aluminium Bahrain.
According to data from the Centre for Monitoring Indian Economy, global aluminium prices rose 10% to $3,370 per tonne in March 2026 from $3,065 in February.
Noting that damage to these two smelters could take 9–12 months to normalize, tightening aluminium supplies, global brokerage firm JP Morgan said in a 7 April note that it expects India’s aluminium prices to “remain higher for longer, driving a sustained commodity upcycle”.
While exact quantities vary depending on the quality of bauxite ore about 170-200 kg of caustic soda is used to manufacture 1 tonne of aluminium, accounting for 4-5% of production costs, per industry estimates.
Crisil said domestic caustic soda prices were up 15–20%. “The ongoing conflict in West Asia has led to domestic caustic soda prices rising 15-20% year-on-year in March 2026. However, the increase is not due to supply-chain disruption, but an offshoot of higher energy costs. Notably, energy constitutes 30-40% of the cost of producing caustic soda…” said Sehul Bhatt, director at Crisil Intelligence.
Bhatt said Indian industries producing alumina—from which aluminium is derived—chemicals, paper, and textiles are likely to face “elevated input costs and margin pressure”.
Industry participants said production has declined in the aluminium extrusion segment. Aluminium is sold in sheets or bars, while extrusions are precisely shaped aluminium products.
“Most input costs, including energy and especially caustic soda, have risen by about 20%. While caustic soda is used to produce alumina in primary aluminium production, it is used for die cleaning (removing residue from moulds) in the extrusion process, said Jitendra Chopra, president, Aluminium Extrusion Manufacturers Association of India.
“For the extrusion industry, margins are taking a significant hit, and production has fallen to 50–60% of capacity. We have taken a wait and watch approach, and since war-related disruptions are expected to be short-term, customers are purchasing only for emergency needs,” Chopra added.
Trickle effect
As a versatile metal used across sectors from automobiles and to consumer durables, aluminium’s price movements have wide-ranging implications for industry.
“Caustic soda prices are highly vulnerable to energy price fluctuations, and energy remains a key variable in the current conflict scenario. Any increase in raw material prices is bound to impact user industries,” said Nirmal K. Minda, president of industry body Assocham and chairman of the Minda Group, an auto component major. The extent of impact on production cycles and margins depends on inventory levels, supply diversification, and the duration of the war, he added.
Minda also noted that the aluminium price rise could spike construction project costs in the near term, as the metal is widely used for window frames, siding and roofing.
The use of aluminium spreads to niche sectors as well. While India is known for its low-cost space missions, rising input costs—including that of aluminium—is set to add pressure across aerospace manufacturing and could affect the country’s competitiveness, according to a domain expert.
“Space components require lightweight and high-tensile materials, and aluminium is the preferred choice. A rise in aluminium prices could raise concerns about India’s cost competitiveness in the space sector, especially if prices remain elevated,” said Souvik Bhattacharjya, director of the resource efficiency & governance division at The Energy and Resources Institute (Teri).
“Any sector that depends on lightweight materials—space, aviation, beverage cans, construction, and automobiles—stands to be impacted,” he added. Bhattacharjya, who has conducted emissions analysis of the beverage can industry, said can makers could see a 5-15% margin hit.
The impact of rising aluminium prices on the auto sector, which contributes about 7% to , has not gone unnoticed among policymakers. The ministry of heavy industries had last month issued an advisory encouraging automakers to use recycled or scrapped aluminium wherever possible.
Given the metal’s extensive use in packaging, the ministry also suggested alternatives such as high-density polyethylene (HDPE), unplasticized polyvinyl chloride (uPVC), ultra high-strength steel (UHSS), and glass fiber reinforced plastics (GFRP) composites for non-critical applications.
Mint earlier also reported that Indian condom makers are facing supply chain disruptions, including shortages of key inputs such as polyvinyl chloride (PVC) and aluminium foil used in packaging.
Vedanta, which accounts for nearly half of India’s aluminium output, declined to comment. Queries sent to Hindalco, which produces 30-40% of the country’s aluminium, on 8 April, remained unanswered until press time.
Emailed queries to the ministries of chemicals and fertilizers and mines; caustic soda maker Grasim Chemicals; industry body Society of Indian Automobile Manufacturers (Siam); automakers including Maruti Suzuki, Tata Motors, and Bajaj Auto; as well as the Indian Space Research Organisation (Isro) also remained unanswered.