Sharp Increase In Imports Will Continue To Impact Hindalco’s Sales: KM Birla
Short-term outlook is challenging given structural oversupply and depressed pricing: Birla
The near-term outlook is challenging for the commodities’ market, particularly the aluminium sector, given structural oversupply and a depressed pricing scenario, Hindalco Chairman Kumar Mangalam Birla said on Thursday.
Overcapacity in China has flooded the Indian market with aluminium, causing imports to surge in financial year 2015-16. The sharp increase in imports will continue to impact sales, Birla said, speaking at Hindalco Ltd.’s annual shareholders’ meeting.
‘Aluminium Demand Remains Strong’
On the positive side, he said demand in India is expected to be strong, as the firm sees an improved outlook on industrial and infrastructure growth.
Demand in India is expected to be strong as we see an improved outlook for industrial and infrastructure growth....The government’s thrust on the power sector works well for the aluminium and copper industry. We are also sharpening our thrust on downstream value added products in Indian, as these yield better realisation.Kumar Mangalam Birla, Chairman, Hindalco
‘Aluminium Prices Have Bottomed Out’
On the aluminium industry scenario in 2015-16, he said the industry witnessed significant challenges as the average realisations crashed.
The average aluminium London Metal Exchange (LME) price was 16 percent lower than the previous year, while the premium was down by 68 percent as compared to that of 2014-15. Regardless, aluminium demand continued to remain strong, and prices appear to have bottomed out, Birla said.
With the expected domestic revival in demand, and improvement in Indian GDP, co-product prices are expected to be encouraging, Birla said, which should strengthen the company’s copper business.
The copper business..continued to deliver robust operational and financial performance, supporting the Indian business.Kumar Mangalam Birla, Chairman, Hindalco
Novelis: Strong Performance
Hindalco’s wholly-owned subsidiary clocked a strong performance, despite headwinds, primarily on the back of a “sharp focus on the product portfolio, which resulted in higher realisations,” Birla added.
Aluminium usage in automobiles is rising and is expected to increase substantially. All the five new auto lines of Novelis have been commissioned. The production of automobile sheets is expected to grow substantially in the coming years.Kumar Mangalam Birla, Chairman, Hindalco
The Way Forward
Given the challenging outlook for the aluminium business in the short term, Birla said the focus in the coming years will be on operational excellence and improving the productivity of new assets. The company’s three greenfield projects – Utkal, Mahan and Aditya Aluminium – have now been ramped up to their full capacity, he added.
..the company has secured around 25 percent 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.
For the current financial year, the company’s capital expenditure is Rs 2,500 crore, out of which Rs 1,500 crore will be for Novelis and Rs 1,000 crore will be for Hindalco, Birla told shareholders.