Aluminium prices to stay firm
Fall in smelter capacities in China and a demand pick-up in Europe to support higher prices
Closure of excess aluminium smelter capacities and a pick-up in demand for the metal in the European markets would support higher prices in the rest of this financial year.
On the London Metal Exchange (LME), the price is at a multi-year high of $2,100 a tonne. An industry outlook report by CARE Ratings has predicted average prices at $1,900-2,100 in the rest of 2017-18.
“The crackdown on old, polluting smelters by China's government will see four million tonnes of capacity going offline this winter, 10 per cent of that country's total. The cut will buoy demand and support prices through this fiscal year,” said an analyst. China is the largest producer of primary aluminium, with a global share of 54 per cent.
Aluminium has had a bull run, with the global price rising 23 per cent to $1,961 a tonne in the first half of FY18, from $1,596 in the corresponding period of FY17. Environment and supply-side restrictions in China, coupled with higher input costs and strong industrial activities, supported LME prices. India's production in this period moved up 3.5 per cent, from 0.85 million tonnes (mt) to 0.88 mt.
Global demand is expected to grow four per cent in calendar year 2017. In the domestic market, demand has shown signs of improvement after September from user industries. Due to slow demand growth in the domestic market, imports, including scrap, fell 17 per cent in the September quarter.
Hindalco, the largest producer, saw its production going up two per cent in the quarter. “All our new plants continue to operate at designed capacity. In the quarter, stable operations and supportive macros delivered strong results. We maintained a very positive view of the growing demand for automotive aluminium sheet globally, with growing demand for electric and hybrid vehicles,” Satish Pai, managing director, said at the company's recent earnings conference call.
At government- owned National Aluminium, production was up 10.3 per cent during AprilSeptember. Vedanta posted a record production of 0.4 million tonnes.