Aluminium: In a lurch - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Aluminium: In a lurch

Nov 14, 2000

Why has Hindalco, India's largest private sector aluminum producer, witnessed a sharp sell off on the bourses? The reason is not far to seek. Aluminium prices on the LME have fallen by over US$ 140 in the last one month.

However, in such a scenario, does one expect domestic aluminium companies, including Hindalco and National Aluminium, to take a big hit? The accompanying table makes the issue clearer.

Margin of safety..
LME Prices (US$/tonne) $ 1,450 $ 1,500 $ 1,550
Premium (US$/ton) $ 75 $ 75 $ 75
Clearing and other charges 2% 2% 2%
Customs duty (incl surcharge and SAD) 33% 33% 33%
Landed cost of imported metal (Rs) 95,912 99,057 102,201
Landed cost of domestic metal (Rs) 86,869 86,869 86,869
Excess of landed import cost of
metal over domestic (Rs)
9,043 12,188 15,332
Source: Hindalco      

As is evident from the table, at an international price of US$ 1,500 per ton, domestic prices are at a discount of over Rs 12,000 to the landed cost of imported metal. This serves as a margin of safety. Indeed, even if the prices were to fall to US$ 1,450 per ton, domestic prices would still be lower by over Rs 9,000. So, does that mean, we can ignore the recent 10% slide in international aluminium prices?

No. Indian aluminium companies are expected to export 23% of their total output in this fiscal year, and therefore, lower international prices will have a direct bearing on their profitability. Also, declining international prices would prevent domestic producers from raising prices in view of the narrowing gap between international and domestic prices. If the gap were too close, the industry would then become exposed to the threat of large-scale imports.

In such a scenario it is not surprising that Hindalco and National Aluminium have seen their stock prices retreat dramatically after aluminium prices peaked in March earlier this year. For the sentiment to turn buoyant again, international aluminium prices need to cover some lost ground.

Equitymaster requests your view! Post a comment on "Aluminium: In a lurch ". Click here!

  

More Views on News

HINDALCO 2020-21 Annual Report Analysis (Annual Result Update)

Oct 27, 2021 | Updated on Oct 27, 2021

Here's an analysis of the annual report of HINDALCO for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of HINDALCO. Also includes updates on the valuation of HINDALCO.

Supercycle or Not these 5 Metal Stocks Delivered Superb Gains (Views On News)

Sep 8, 2021

These stocks have rallied than 100% in the last year. Is there more upside to come?

HINDALCO Announces Quarterly Results (1QFY22); Net Profit Up 668.5% (Quarterly Result Update)

Aug 9, 2021 | Updated on Aug 9, 2021

For the quarter ended June 2021, HINDALCO has posted a net profit of Rs 33 bn (up 668.5% YoY). Sales on the other hand came in at Rs 414 bn (up 63.6% YoY). Read on for a complete analysis of HINDALCO's quarterly results.

Hindalco Q4 Profit Surges 189% as Demand Surpasses Pre-Covid Level (Views On News)

May 24, 2021

A look into the country's leading aluminium and copper manufacturer's stellar Q4 performance.

HINDALCO Announces Quarterly Results (3QFY21); Net Profit Up 76.2% (Quarterly Result Update)

Feb 11, 2021 | Updated on Feb 11, 2021

For the quarter ended December 2020, HINDALCO has posted a net profit of Rs 3 bn (up 76.2% YoY). Sales on the other hand came in at Rs 114 bn (up 11.0% YoY). Read on for a complete analysis of HINDALCO's quarterly results.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

HINDALCO SHARE PRICE


Nov 30, 2021 (Close)

TRACK HINDALCO

  • Track your investment in HINDALCO with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

HINDALCO - SOUTHERN MAGNESIUM & CHEMICALS COMPARISON

COMPARE HINDALCO WITH

MARKET STATS