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Aluminium: Production trends - Views on News from Equitymaster
 
 
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  • May 10, 2001

    Aluminium: Production trends

    The aluminium sector, which enjoyed robust growth in FY00, did not have such a favourable year in FY01 with production growth declining from 14.2% to an expected 4.6%.

    Being an economy sensitive sector the decline is not surprising considering that the GDP and IIP growth rates declined in financial year '01 by an estimated 60 and 100 basis points respectively. More importantly, the key consuming industries of aluminium namely power, transportation and consumer durables have registered disappointing numbers for fiscal '01, which could have led to the sharp drop in aluminium production growth rates.

    Consumption, which drives production, has registered negative growth of 5% for FY01. The three year CAGR for domestic consumption is a paltry 2.2%. Consequently, the higher production has been absorbed by strong export sales, which registered a growth of 21.9% in the last fiscal. Aggregating domestic and export sales the country continues to face a favourable demand-supply scenario.

    Aluminium production has fluctuated significantly over the last three years reporting a growth of 2.6%, 14.2% and 4.6% resulting in a three year compounded growth (CAGR) of 7%. The aluminium business seems to have a better second half as compared to the first half with the second half registering, an average, 7% higher production compared to the first half over the past four years. This could be attributed to the characteristic of its consuming industries. New construction activity picks up in the post monsoon season while transportation picks up after harvesting of the khariff crop, which could result in higher aluminium consumption during this period.

    Production Trends
    (tonnes) 1st Half 2nd Half
    FY98 255,500 274,800
    FY99 257,753 286,119
    FY00 299,880 320,965
    FY01 321,339 328,055

    Although YoY monthly production growth rates were lower in FY01 the slow down was mainly witnessed in the second half of the fiscal. Growth rates slowed down from high single digits (7%) in the first half to low single digits of 2.3% in 2HFY01. With export sales increasing from 10.6% to 23.8% of total sales over the last three years the slowdown in U.S and Japan, two largest aluminium consumers, could have also impacted the fortunes of the sector.

     

     

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