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Hindalco Industries, an Aditya Birla group company, plans to invest ₹3,000 crore over next two years in downstream projects to increase contribution of value added product and protect its earning from volatility on the London Metal Exchange.
Investment in increasing flat rolled product capacity at Hirakud itself will entail an investment of ₹2,700 crore and the rest of the capex would go for producing alumina speciality chemicals.
Also read: Hindalco net up 77% on higher realisation, lower cost
Hindalco has developed special alumina and alumina hydrates products through in-house technological innovation by its Research and Development team at its Innovation Centre-Alumina.
The company has already lined up an investment of ₹700 crore in setting up a 34,000-tonnealuminium extrusion plant at Silvassa.
Satish Pai, Managing Director, Hindalco Industries, told BusinessLine that the entire capex will be funded through internal accruals as the debt deleveraging exercise will continue through next year.
The demand-supply of aluminium is expected to remain tight leading to firm price trend in the coming months. Aluminium prices benchmarked to LME have increased from $1912 a tonne to $1200 in last three months.
The production cost for Hindalco is expected to go up by three per cent in the March quarter due to increase in coal and other raw material prices.
Unlike serious concern raised over sharp increase in steel prices, the user industry has absorbed the rise in aluminium prices.
Pai said aluminium prices have not shot up like that of steel and there has been no such big concern like steel.
Though the sharp jump in scrap imports remain a concern, Pai said the government should ensure the end use of metal produced from the scrap.
Demand in China
On the prospects of China dumping aluminium in India, he said the demand in that country is so robust that it has not exported many metals in last few metals to meet their buzzing demand.
In fact, aluminium prices in China were higher than that of LME for good 3-6 months, opening up an arbitrage opportunity for the first time in many years, said Pai.
The synergy benefits to be achieved by Novelis from the Aleris deal is expected to be at $180-190 million compared to $150 million estimated earlier, he added.
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