Aluminium usage up 15% in Apr-Aug

Rising demand from the automobile, construction and power sectors continued to boost aluminium consumption. The metal's consumption increased 15 per cent to 3,50,000 tonne during the first five months of the current fiscal.

Cumulative aluminium production in April-August was 3,78,728 tonne, a rise of 9.4 per cent over the corresponding period of the previous year. This growth in production is on the back of a slowdown last year, and the momentum is expected to remain steady during the rest of the year, according to an Icra report.

Demand growth of 14-15 per cent is expected to sustain for the rest of the year with the aforesaid sectors continuing to help maintain metal consumption.

On the other hand, global demand for aluminium is likely to grow hardly at 4-5 per cent during the fag end of 2005, with specific end-uses across various regions expected to drive the growth.

Reconstruction efforts, after the hurricane damage, in the US are expected to bring a one-time upturn in demand for aluminium products. Alumina production losses and the resulting shortage are adding to supply pressures on the aluminium market.

It has been estimated that the aluminium inventories monitored by metal exchanges in New York and London will fall by two-thirds by the end of 2006, reducing supplies to demand equivalent of three and a half days from about 10 days now. This has positive implications for the fortunes of aluminium players.

Reflecting the global trend of rising prices, ingot prices in Mumbai during September 2005 were higher by 3.9 per cent. The average ingot price in Mumbai during April-September 2005 was Rs 102 per kg, up 2.8 per cent y-o-y.

Growth in volume coupled with firm price realisation has resulted in strong financial performance by major aluminium companies in the first half of the current fiscal (April-September 2005).

The downstream standalone producers were, however, an exception.

Hindalco's operating revenue from aluminium business rose 12.4 per cent, y-o-y, during H1 of FY 2006 to Rs 27,548 million, driven by higher volumes, an enriched product mix and better realisations helped by buoyancy in the LME prices. Primary aluminium production scaled up 8 per cent, y-o-y, to 2,13,368 tonne in the same period.

While average aluminium realisations per tonne increased to Rs 109,445 from Rs 1,04,116 in H1 of FY 2005, absolute realisations rose 9.4 per cent, y-o-y, to Rs 18,975 per tonne.

In the same period, operating margins improved to 38.2 per against 34.8 per cent during the corresponding period of FY 2005, notwithstanding pressures on account of higher cost of inputs, impact of import duty cut and appreciation in the domestic currency.

Similarly, Nalco's operating revenue from aluminium business rose 17.5 per cent, y-o-y, to Rs 14,929 million in the first half of 2005-06, driven by higher volume and prices. Aluminium production scaled up 13.7 per cent, y-o-y, to 178,097 tonne. PBIT margins improved to 24 per cent vis-a-vis 23.7 per cent during H1 of FY 2005.

Prices are expected to be volatile and will, perhaps, move within a range of $1,900-2,000 over the medium term depending on the supply situation.