Rising aluminium imports a concern, says Birla

Hindalco Industries, an Aditya Birla group company, is poised for challenging times with aluminium supply exceeding demand in the overseas markets. The profitability of Indian metal companies was hit as they sell their products based on benchmark LME prices.

Addressing shareholders at Hindalco’s annual general meeting on Wednesday, Kumar Mangalam Birla, Chairman, said notwithstanding the strong operational performance, the short-term outlook is challenging given the structural oversupply and depressed pricing scenario.

“The sharp increase in imports into India will continue to impact sales,” he said.

On the positive side, he added that demand in India is expected to be strong with the government thrust on the power sector works well for the aluminium and copper industry.

The thrust will be on downstream value added products in India, as these yield better realisation, he said.

Going ahead, the company will focus on operational excellence and increasing the productivity of new assets, cash conservation and de-leveraging. Hindalco has already secured around 25 per cent of its coal requirement in the recently concluded coal linkage auctions. This, along with the existing linkage for Renusagar power plant and captive coal mines, will provide adequate coal security and good visibility to power cost for aluminium production, he said.

Copper demand is facing challenging times as China is moving away from an investment-led economy to a consumer-driven economy.

The lower demand coupled with the ample availability of concentrate manifested in healthy treatment and refining charges, said Birla.

Dwelling on Novelis, a wholly-owned subsidiary of Hindalco, he said the company faced significant head winds as it continued to ramp up production from the newly commissioned facilities.

A sharp decline in regional premium (which unlike the LME cannot be hedged) resulted in a Metal Price Lag, which adversely affected its financial performance throughout the year.

However, he said aluminium usage in automobile is expected to increase substantially and Novelis is well poised to tap this opportunity with the commissioning of all the five new auto lines.