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Surge in alumina prices benefits domestic companies - Views on News from Equitymaster
 
 
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  • Jan 6, 2000

    Surge in alumina prices benefits domestic companies

    Indian aluminium producers are having a field day as international prices of alumina have soared from US$ 150 per tonne to US$ 350 per tonne in 1999. As a consequence, aluminium prices too have registered a sharp rise to US$ 1,614 per tonne. The rise in prices is likely to benefit the Indian alumina exporters most. This has been reported by a leading national daily.

    The international alumina prices have been witnessing an uptrend mainly due to the accident at Kaiser Aluminium, a leading manufacturer. This has created a supply gap in the market even as global demand for aluminum continues to register growth. The growth has been mainly due to a global recovery after a slowdown witnessed in 1998.

    The Indian companies have been actively tapping the export markets to capitalise on the higher realisations. According to CMIE, exports of aluminium (other than products) grew by 489% (April - September) as against a decline of 78% registered in the corresponding period last year.

    In light of the not so strong recovery in the domestic market, the move to tap the export markets will benefit the domestic manufacturers. The higher realisations will more than help in absorbing the rise in energy costs. The aluminium companies will benefit even more once the domestic economy gains further momentum.

    The rise in aluminium prices in all probability will cool down once the Kaiser refinery commences production. Then onwards, the prices will be determined by the growth in demand rather than supply shocks. However, problems could arise if once again the global economy were to slow down. Then it would be cost control that would drive margins.

     

     

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