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India Aluminium: smooth ride seen as prices soar

CALCUTTA: Indian aluminium firms should have a smooth ride this year because of bullish prices and a surge in demand, analysts said on Tuesday.

"The market is expected to be basically balanced in 2000," said N.K. Choudhary, managing director (operations) of Indian Aluminium Co Ltd (Indal), a subsidiary of Canada's Alcan Aluminium.

"Aluminium prices may rule at $1,500-1,600 per tonne during the year 2000 and all primary producers are expected to post good results for the year," he said.

Analysts forecast further price hikes by domestic producers as imported metal was still at a premium of about 20 percent to local prices.

Aluminium soared to 29-month highs on the London Metal Exchange (LME) on Monday amid market tightness and a shortage of feedstock alumina.

Aluminium ended the afternoon kerb at $1,702 a tonne, $37 up from Friday's close.

"We are positive across the sector," Rajesh Mazumdar, senior analyst at BNP Peregrine India, told Reuters.

Indian firms raised metal prices this month and are projecting a hefty rise in earnings from alumina exports in a rising market.

India's largest private producer Hindalco Industries Ltd withdrew a 1,000-rupee-per tonne discount on January 1. A week later, state-run National Aluminium Company Ltd (Nalco) increased its aluminium ingot prices by the same amount.

ALUMINA PRICES

Global alumina prices had risen to about $350 per tonne in January from $130-140 in the middle of last year, Choudhary said.

Indal's alumina exports are likely to rise to 165,000-175,000 tonnes in 1999/2000 (April-March) from 130,000 tonnes a year ago, company officials said.

The company is optimistic about alumina prices.

"We expect alumina prices to rule at above $250 per tonne for the major part of 2000. Both Nalco and Indal are likely to be significantly benefited from this development in 1999 and 2000," Choudhary said.

Analysts said metal producers were expected to gain from the global consolidation and mega-mergers in the aluminium industry.

"The producers are going to have a greater bargaining power in the market," an analyst in a Bombay-based brokerage said.

RISING DEMAND

Analysts and company officials said domestic demand for aluminium and downstream products were rising.

Mazumdar said the demand for aluminium was rising in the transport sector, which accounts for 20 percent of the domestic demand, and the construction sector, which consumes another 10 percent.

However, the electrical sector, which accounts for 38 percent of the domestic demand had not grown, Mazumdar said.

Indal expects India's aluminium consumption to rise by six to seven percent to 580,000-590,000 tonnes in 1999/2000 against a two to three percent rise in previous years, Choudhary said.

HIGHER OUTPUT

Analysts said India's aluminium production in 1999/2000 was expected to rise to 620,000-630,000 tonnes against 542,000 tonnes in 1998/99.

The biggest contributor to the jump in output will be Nalco, whose output last year was hit by a breakdown of some of the pots at its 218,000 tonne-per-annum smelter.

Combined production by Nalco, Hindalco and Indal rose to 374,034 tonnes in the first nine months of the current fiscal, up from 311,097 in the corresponding period of 1998/99.

The three firms constitute about 75-80 percent of India's total aluminium production, according to industry data.

India's primary and secondary aluminium exports are seen rising to over 120,000 tonnes in 1999/2000 from about 66,000 tonnes a year ago, analysts said. -Reuters