Contrary to projections of a significant rise in aluminium prices in 1998 to the above $1,700 per tonne levels, the LME prices fell steadily to below $1,250 per tonne over the last fortnight, the lowest in the last five years.This is against an average price realisation of around $1,450 per tonne in the last financial year for the domestic primary aluminium producers, a year in which companies led by Hindalco, now the largest player, announced price hikes twice. A senior official of a leading aluminium company said: "It could be a repeat of 1993 when the international majors got together and decided to cut production significantly, forcing a northward climb for primary aluminium prices onthe London Metal Exchange."

"Every primary aluminium producer is now banking on a similar situation in 1999 so that they can hike domestic prices," he added.

An analyst with an FII brokerage said: "1998 was expected to be a golden year for the domestic aluminium companies. But poor offtake and a flat demand from the south-east Asian countries has ensured that LME prices will fall further. "This has resulted in not just low price realisations for the domestic firms, but has also ensured a significant erosion in their market capitalisation."

While Hindalco has seen its market capitalisation drop 32 per cent during the year, public-sector major National Aluminium Co (Nalco), till recently the hottest aluminium scrip for the FIIs, suffered, as its smelter met with a technical snag.

Industry sources say that the primary aluminium producers have been partially aided by a steady depreciation of the rupee, which has made import of the primary metal dearer.

A change in the duty structure - the duty onprimary aluminium has now been raised to 25 per cent from 10 per cent, bringing it at par with that on semi-fabricated products - has not only benefited the primary producers, but has also dealt a body-blow to the secondary players.

"Even in October-November, Hindalco was selling the metal Rs 2,500-3,000 per tonne lower than the landed cost of primary aluminium. But the recent drop in the LME prices has brought the landed cost almost at par with domestic prices," analysts said.Any rise in the LME prices at this moment, they added, would enable the primary producers to raise prices again. Analysts and aluminium producers expect international prices to rise to around the $1,400 per tonne levels over the next three months.