Mumbai, Mar 12: Primary-aluminium companies, despite being faced with declining domestic demand and falling international prices, have decided against clearing their inventories through major discount schemes.Senior officials with a public sector aluminium major said since the rupee has depreciated substantially against the dollar over the past three months, primary-aluminium users will find it difficult to import the metal.
The import duty on primary metal has also been increased to 25 per cent. This will make it unviable for the users to import primary aluminium, despite declining prices on the London Metal Exchange (LME). LME prices have dipped from around $1,700 per tonne in November to around $1,450 per tonne this week.
Industry sources said the demand for aluminium has been growing by about 5 per cent in the last quarter of the fiscal as compared with about 8 per cent in the first nine months of 1997-98. The industry has attributed this to lower aluminium offtake by the government.
The primary-aluminium producers, in January, were forced to put off a price hike for the fourth quarter by the sudden crash in LME prices due to low offtake from south-east Asian countries. The price revision was much-needed, as it would have significantly helped improve sales realisation during 1997-98.
The margins of the aluminium companies had taken a beating over the past two years as international prices witnessed historic lows in 1995 and 1996.LME prices began to look up again from early 1997. This led to the primary producers increasing prices twice in 1997-98, the first time in April for the first quarter and then again for the third quarter.
As a result, primary aluminium prices have increased by around Rs 6,000-8,000 per tonne since April 1997, with Hindalco metal being the costliest at around Rs 72,000 per tonne. However, in the last quarter, a rise in demand from certain user industries like the automobile and electrical equipment sectors have been offset by low government offtake. In the auto sector, the demand has been primarily from the scooter-makers.
Hindalco sources said the recent LME downtrend is a `temporary phenomenon.' "We expect a reversal in the current trend soon and may increase prices in the April-June quarter," they added. Aluminium analysts with leading foreign-institutional investor (FII) brokerages had projected an average London Metal Exchange price of around $1,650 per tonne in 1997-98 as compared with around $1,450 per tonne in the last fiscal, thus projecting a major reversal of fortune for the primary-aluminium producers.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
