Metals Prices Have Bottomed Out, says Tom Albanese
Recent rallies may help Vedanta to take a relook at the possibility of getting into steel business in near future
Kolkata: Tom Albanese, CEO of Vedanta Ltd, believes the metals sector has finally bottomed out and could be retracing its steps to mirror the buoyant second-half of 2009. The strength of the rally seen in nearly all the products it produces also seems to have given Vedanta hope to relook at the possibility of getting into steel business in the near future.
“We think the metal sector has gone past its bottom. We are seeing it in the strength of the rally. In nearly all the products we produce, prices have improved by 20100% in the past two months, Albanese told ET in an interaction soon after the company declared its audited financial results for 2015-16. Albanese was referring to the bounce back in metal prices in the second half of 2009, recovering from the liquidity crisis of 2008.
Anil Agarwal’s oil to aluminium resources major Vedanta on Thursday posted a loss of ₹ 11,181 crore in Q4FY16 based on a series of impairment charges as global commodity prices plunged. Vedanta incurred some ₹ 12,304 crore of goodwill impairment in Q4 of which, ₹ 10,074 crore pertained to Cairn triggered by fall in oil prices. Further in light of the sliding iron ore prices, it provide for acquisition goodwill and carrying value of exploratory assets in Western Cluster, Liberia to the tune of ₹ 1,490 crore, while Copper Mines of Tasmania and Bellary Karnataka (Iron Ore) incurred an impairment charge of ₹ 456 crore. However, with global commodity prices improving, Vedanta could be seeing the end of such impairment charges.
Between February and April 2016, oil prices have improved from $28 to $40 a barrel, iron ore has almost doubled from $37 to $70 a tonne; while zinc has gone up 90% to $1,950 per tonne. Copper has risen 25% to $4,930, while aluminium is up 20% having touched $1,650 a tonne. Most of this is based on global market cues.
In the past two years, metals growth in India has remained in single-digit zone close to GDP rates. “However, historic data suggests after per capita GDP crosses $1500, there comes at certain tipping point when metal demand rises above the GDP growth,” Albanese said adding, “In India’s case, I am certain that the tipping point is not too far off.”
MAKE IN INDIA PUSH
“We are hopeful of seeing greater metals and energy consumption in India as part of the Make in India agenda,” Albanese said. A geologist by training, he is convinced that “while India has the endowment in metals and energy, it has to combine this endowment with investor-friendly policies based on its own capabilities and best practices in technology. Defence manufacturing, which is aluminium intensive, is another area with tremendous opportunity that Vedanta would be looking at in the next 5-10 years, given its strength in the metal and other exotic alloys, Albanese said.