BS reported that aluminum, on the London Metal Exchange has been falling since the beginning of the year. So has been the core earnings of Hindalco Industries and in turn the profits. The company maintains that its two businesses, aluminum and copper, complement each other well.
Mr D Bhattacharya MD of Hindalco Industries said that "If the aluminum business is down then the copper business comes to the rescue and when copper prices are under pressure, aluminum performs well. This is true to an extent but the fall in profits caused by the aluminum business is not getting fully covered by copper.
Hindalco's earnings before interest and tax for aluminum has been falling constantly since the Q1 of the current financial year. The Ebit share for the white metal has come down to 59% at the end of the Q3 as against a robust 81% at the end of the Q1. The aluminum prices on the LME have fallen from USD 2,603 per tonne to USD 2,091 per tonne in the given nine months.
Mr Bhattacharya blames the falling LME for the given performance of the aluminum business. He said that in April 2011 aluminum LME was around USD 2,700 per tonne and in December 2011 it was around USD 2,026 per tonne. This doesn't augur well. Indeed, this is a very difficult situation.
Currently, the aluminum price on the LME is hovering around USD 2,100 per tonne. The cost of producing aluminum has been on the rise and the selling price for the metal has been on the constant decline. Nearly half of the global production is at a cost of above USD 2,250 per tonne and close to million tonne of aluminum production is already cut in the current year due to the falling LME.
Mr Bhattacharya said that he won't be surprised if there are more cuts in global aluminum production. Already, close to 1 million tonne of aluminum production is shut because of the falling LME. In India, the situation may turn grim in the near future. Coal accounts for one third of the aluminum cost and has been on the upswing since 2009.
豫公网安备41010502003434号