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Hindalco expects 6% growth in demand

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MUMBAI, July 5

AMID hopes of recovery in the global aluminium industry, the 2001-2002 annual report of domestic aluminium major Hindalco Industries Ltd says that experts feel global consumption will be in excess of 4 per cent in 2002 against the de-growth of 4.1 per cent in 2001.

"Global production is expected to increase by around 5.5 per cent due to the reactivation of idled capacities in the Pacific North-West and significant increase in smelting capacities in China... Experts, thus, forecast a surplus in 2002, but see market balance on the back of strengthening demand in 2003. LME prices are predicted to range between $1,350-1,450 per tonne during the first half and recover later during the year, reflecting demand recovery," it said.

In the domestic market, it pointed out that the outlook was positive and predicated on global recovery and improved economic activity. After having gone through one of the more difficult periods, the industrial sector appeared to be gearing for a strong rebound in the near future.

The key drivers of aluminium demand in India include the construction, transportation, consumer durables and packaging sectors.

"We are expecting a 6-7 per cent demand growth in fiscal 2002-03. We expect demand growth to average around 8 per cent over the next 3-5 years," the report said.

Domestic competition, it added, would intensify due to capacity expansion by large producers, both in metal and downstream products. This would exert significant pricing pressure since downstream segments are already suffering from capacity overhang and intense competition from fragmented smaller producers. Prices will also be affected by the recent cut in import duties. Primary metal prices are expected to move broadly in line with LME trends.

"The profitability of manufacturers will, thus, depend on their ability to strengthen efficiency and cut costs as well as to penetrate successfully into the product niche segments of the value-added products segments in future," the report said.

Hindalco's own immediate-term growth is perceived to be driven by its four strategic initiatives - brownfield expansion, more prominent synergy gains from Indal, realisation of full potential of the ongoing profit improvement exercise and the benefits of the new business improvement exercise.

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