Mineweb reported that rising costs in the aluminum business and sluggish market conditions have crimped the margins of aluminum firms in India. Though three firms in the sector have posted a decline in Q3 earnings new investments in ramping up production are clearly on track.
Aluminum, on the London Metal Exchange has been falling since the beginning of the year. A similar decline has been witnessed in the core earnings and profits of aluminum firms in India. India's biggest state owned producer, National Aluminum Company posted 80% decline in Q3 profit as prices of the metal slid and energy costs rose. Net income fell to USD 10.4 million.
Similarly, mining major Vedanta Resources posted 5% dip in core profit its December quarter hit by weaker performances at its aluminum operations. Earnings before interest, tax, depreciation and amortization were USD 848.4 million for Q3.
Indian nonferrous metals producer Hindalco Industries EBITDA earnings for aluminum was also down to 59% at the end of the Q3 as against a robust 81% at the end of the Q1. Hindalco's net profit for Q1 was USD 131 million, Q2 was USD 102 million and in Q3 the firm posted a net profit of USD 91 million.
Aluminum prices on the London Metal Exchange on the other hand has fallen from USD 2603 per tonne to USD 2091 per tonne in the same 9 month period. To counter the downtrend, Nalco has offered a discount of $30.45 per tonne on major categories of aluminum products. Earlier this month, the company had raised prices by USD 40.8 per tonne across all products after prices rose overseas.
Moreover, in order to maintain a healthy debt-equity ratio, the Aditya Birla Group firm Hindalco Industries is all set to issue up to 150 million preferential warrants to the promoters and raise USD 407 million. Its board has approved the offer and the money is to be used for various expansion plans. Though aluminum prices were somewhat depressed in the latter half of 2011, companies said the are witnessing a small recovery early 2012 with better prospects in the coming months.
Mr Milind Sanghvi analyst at a broking firm said that "The demand from the infrastructure segment is rising in Asia. Though China remains a major force and both the Chinese and India economy are still growing demand from other markets including the US, is also on the rise. In April 2011, aluminum LME was around USD 2700 per tonne and in December 2011 it was around USD 2026 per tonne. By March 2012, prices at the LME should be above USD 2,400 per tonne.”
Mr SK Roongta former chairman of the Steel Authority of India who is now enrolled in taking aluminum to new heights for Vedanta Aluminum said that India's aluminum growth story is just getting unfolded. Since India is home to one of largest reserves of coal and high grade bauxite in the world, the country could realize its potential and become a global hub for aluminum.
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