"Prospects are far from sanguine. If projections prove to be near the mark then the market will record a small surplus over the next two years and may lead to a rough balance," the report for 1997-98 said.

Following the collapse of currencies in Thailand, Malaysia and Indonesia there might be a spate of cancellation of major construction projects and scaling back of vehicle production which will adversely affect the aluminium industry.

"Besides, business failure in south Korea, the fourth largest aluminium consumer, has raised serious questions about sustainability of the aluminium industry in India," it said.

The ministry has projected an average price of $1500 per tonne for aluminium at the London Metal Exchange (LME) on account of these factors. This is lower than the 1997 price of 1587 dollars a tonneand higher than the current prevailing price of around 1350 dollars per tonne.

The report has also said the possibility of further price spikes is not ruled out due to the recent escalation of problems in Asia and the resulting shortfall in demand. On the production forecast, the report said western output will rise from 16.15 million tonnes (mt) in 1997 to 16.95 mt in 1998 and 17.4 mt in 1999 while demand will rise to 18.4 mt in 1998 from 17.5 mt in 1996.

The growth in demand shows a slow down to 2.8 per cent in 1998 from the earlier 5.3 per cent. Thus, the west, "will remain a substantial importer of the metal," it added.

Elsewhere, a total of 8.25 lakh tonnes of aluminium per annum will be mined in west Africa while Asia and Australia will contribute about the same amount between 1995 and 1999.

The report further said China may not require any imports from the west or the CIS nations as its output has gone up while local demand has eased. On the domestic front, total production of aluminium during1997-98 was 5.53 lakh tonnes marginally higher than than previous year's production of 5.20 lakh tonnes, the report said. Export by Hindalco and Nalco stood at 81,682 tonnes.