Agri Business

‘Hindalco has insulated itself from LME volatility’

Our Bureau Mumbai | Updated on September 10, 2020 Published on September 10, 2020

Kumar Mangalam Birla, Chairman, Aditya Birla Group

Hindalco Industries, an Aditya Birla Group company, has de-linked 80 per cent of its consolidated EBITDA from the volatile LME (London Metal Exchange) prices by moving up the value chain.

Addressing shareholders virtually at the company’s annual general meeting on Thursday, Kumar Mangalam Birla, Chairman, Hindalco, said the company’s strategy to improve business sustainability by reducing exposure to LME price fluctuations and increasing the share of downstream value-added products across businesses is playing well.

What continues to hurt the domestic aluminium and copper industry is low-cost imports, he said.

Cash conservation and maintaining adequate liquidity will help deliver sustained performance despite the current tough environment due to Covid-19, he added.

Despite the slump in economy in the June quarter, the activity levels are gradually normalising. The International Monetary Fund (IMF) has estimated that the Indian economy will rebound to 6 per cent in FY22.

The manufacturing and construction sector has been severely hit and will recover gradually. The government’s commitment towards structural reforms, the Atmanirbhar Bharat package and easing of further restrictions in its unlock phases will help revive economic activity in a calibrated manner. There are visible signs of economic activity, and high-frequency data show improvement in June-July.

‘The worst is over’

The Finance Ministry has highlighted that the worst is already over, but has cautioned that economic recovery depends on how the Covid-19 infection curve evolves across the country going forward, he added.

The subdued growth, rising trade barriers, uncertainty surrounding trade and geopolitics have led to a sharp fall of about 15 per cent in global aluminium price to $1,791 a tonne last year from $2,110 a tonne in 2018.

Amid slowing domestic demand, imports continue to be a concern for domestic players, which accounted for 58 per cent of the market in FY20. Overall imports, including scrap, touched 2.2 million tonnes last fiscal, he said.

In the ongoing Covid environment, he said all of Hindalco’s aluminium upstream plants continue to operate at near-full capacity with all logistics infrastructure coming back on track. All aluminium downstream plants are operating at partial capacity to meet market conditions. The export demand remains stable and continues to offset the current subdued domestic market conditions.

The copper facilities are also ramping up to their optimal levels. At Novelis (Hindalco’s US-based subsidiary), all plants are operational and many are now running at their full capacity. All the automotive customers in North America and China are now pulling at nearly pre-Covid levels, Birla said.

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Published on September 10, 2020
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