Indian aluminium majors are hopeful that the price of the metal on the London Metal Exchange (LME) may rise in the coming weeks as Euro zone leaders gear up to align their positions on centralised control of the euro zone budgets to fire-fight the debt crisis.
After being on a steady decline for around the previous six months, aluminium prices gained $120 a tonne in the last three days in the wake of some positive signals from the euro zone.
“The price of the metal tumbled from $2,700 a tonne in mid-April to below $2,000 in the October-November period. If there is no fresh crisis, we see the metal price on the LME being on a recovery phase,” Mr B.L. Bagra, NALCO's Chairman and Managing Director, told newspersons on the sidelines of the International Conference on Aluminium, here.
Sharing a similar view , Mr D. Bhattacharya, Managing Director of Hindalco, also indicated the price of the metal on the LME “will look better” in the coming weeks.
Margins under pressure
Mr Bagra however said globally margins of aluminium producers will remain under pressure, due to the persisting spiral in energy costs. “Today, one-third of the existing capacity worldwide is operating on losses. On this count, India is better placed, as cost of alumina is comparatively lower,” he pointed out.
The three major Indian aluminium producers—Hindalco, Nalco and the London-listed Vedanta—have lined up ambitious expansion plans, expecting India, together with China, to lead in aluminium production in the next decade. “The aluminium growth rate in India is expected to be 11 per cent up to 2016, higher than that of China at 10 per cent,” Mr Bhattacharya said.
While Hindalco is doubling its existing capacity with an investment of about $10 billion by 2016, Vedanta is executing a Rs 60,000-crore expansion plan to add about 1.6 mt of fresh capacity to its existing 775,000 tonnes. Nalco is setting up a Greenfield unit of five lakh tonne capacity at a cost of Rs 16,000 crore, apart from another Rs 6,000 crore to add one mt of alumina capacity.
“We have already spent 75 per cent of the capex of Rs 60,000 crore. We expect our new smelters to start production next fiscal and reach full capacity in less than two years,” Mr S.K. Roongta, Vedanta's Managing Director, said.
All the three producers are heavily banking on the Government's nod to allocate coal blocks, which could make aluminium production profitable at the desired level. “We will be looking at coal assets, once the policy initiative is in place,” Mr Roongta said.