Sep 15, 2000|
Aluminium prices on a roll…
In the first half of September, domestic aluminium stocks, Hindalco, Indian Aluminium and National Aluminium have staged a rally on the bourses. Justification for the same can be found in the recent spurt in metal prices on the London Metal Exchange (LME).
Financial year 2000 is proving to be a good one for aluminium companies. After having peaked at levels over US$ 1,700 earlier this year, aluminium prices crashed to US$ 1,400 in late March. However, the new financial year seems to have also heralded a period of bullishness in the aluminium markets. On a point-to-point basis aluminium prices have risen by 17% since April 2000. Infact, since August aluminium prices have jumped sharply by 7.8% to US$ 1,638. The enthusiasm is palpable, both among aluminium companies and investors.
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Rising international prices are sure to benefit Nalco and Hindalco, both of which are large exporters. They are thus able to take an advantage of a rise in international prices. However, domestic prices are unlikely to respond in a huff or to the full extent of the increase in international prices. This is largely due to policies followed by large companies as Hindalco. In case the price rise were to sustain, domestic prices too could trend upward, lifting margins on domestic sales. The rise in prices seems to be well timed. It will help aluminum companies absorb the fall out of higher oil prices on their margins.
Although rising aluminium prices benefit the industry, they tend to trigger fresh investment activity in the sector. Also, inefficient smelters come on stream as higher prices justify their operations. This fresh supply has the potential to derail the current buoyancy in aluminium markets.
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