Primary Aluminium Imports May Zoom As Prices Tumble

Public sector giant National Aluminium has already begun offering an extra 15-day period of credit to domestic buyers. Against a 60-day period earlier, Nalco is offering a credit period of 75 days.

Industry sources say companies (especially secondary users) with strong export commitments are likely to rush for substantial imports.

Landed price of imports is already below domestic price of primary metal. Companies that may go for imports if prices do not firm up internationally include Indian Aluminium (Indal), which has turned a net buyer of the base metal over the last few years, primarily due to acute power shortages at its Belgaum and Alupuram smelters.

 

Indal, the Indian associate of Canadian major Alcan, alone accounted for nearly half of India's total import of primary aluminium last year.

Indal is likely to take advantage of falling LME prices through substantial imports, an Indal source said.

The downtrend on the London Metal Exchange is expected to continue right through the third quarter as current stocks at the LME warehouses, which have risen over 60 per cent to around 900,000 tonnes, equal demand for the next eight weeks.

Decreasing demand from Asian and European countries, as well as large scale dumping by Russian producers, have contributed to the slide in primary aluminium prices.After rising to over $2,000 per tonne during the third quarter of 1995-96, prices of the base metal have fallen since and closed at $1,322 per tonne on the LME on Monday.

Under the situation, major domestic aluminium producers like National Aluminium (Nalco), Hindalco and Bharat Aluminium (Balco) will be left with no choice but reduce prices, say industry sources.

S N Johri, chairman and managing director of Nalco admitted that there is a strong possibility that aluminium prices will soften further and in that case the domestic producers will be forced to revise their price line downwards. We will watch for another fortnight and if by then LME prices show no signs of recovery, Nalco will have to lower prices, Johri said.

If Nalco and Balco reduce their prices, Hindalco will have to follow suit, industry sources say. Hindalco sources were not available for comment. The price difference between Hindalco metal and that of Nalco already stand at an all time high of Rs 4,300 per tonne. While price of Hindalco aluminium is around Rs 65,800 per tonne, that of Nalco is around Rs 61,500 per tonne.

The aluminium majors have, however, already begun to offer major incentives to their clients. While Hindalco is offering discounts of Rs 1,000-1,500 per tonne on aluminium ingots, Nalco has increased the credit period from 60 days to 75 days.

Johri says that such incentives are only short term solutions and cannot be offered over longer periods.

Producers of aluminium sheets, extrusions and rods will, in the meanwhile, go for cheaper imports till base metal prices in the domestic market are revised.