Aluminum prices
Aluminum prices have a
great bearing on the performance of the aluminum industry. Prices
in the local aluminum market closely replicate the prices on the
London Metal Exchange (LME). The prices on the LME reflect the
demand-supply equation and inventory levels as also the forward
aluminum prices.
Integrated aluminum
manufacturers operate under a highly protective regime and
therefore to some extent are cushioned against downtrend in the LME
prices. Import duties on aluminum ingot are to the tune of over
27.5% (20% basic, special customs duty of 5%,surcharge of
10%).
Import duty rates on
most of the downstream products are the same as that of primary
metal. Countries in South East Asia have large downstream
capacities and have hardly any smelting capacities. Therefore,
downstream manufacturers in India face threats from cheap the
import of value added metal. The situation has been aggravated by
the recent crisis in the region.
LME Aluminum
Prices ($/ton)
|
Jan-97
|
1,575.6
|
|
Feb-97
|
1,580.0
|
|
May-97
|
1,625.3
|
|
Jun-97
|
1,567.6
|
|
Jul-97
|
1,592.0
|
|
Aug-97
|
1,710.6
|
|
Sep-97
|
1,610.6
|
|
Oct-97
|
1,607.9
|
|
Nov-97
|
1,599.0
|
|
Dec-97
|
1,530.5
|
|
Jan-98
|
1,485.8
|
|
Feb-98
|
1,465.6
|
|
Mar-98
|
1,437.7
|
|
Apr-98
|
1,438.2
|
|
May-98
|
1,364.7
|
|
Jun-98
|
1,280.0
|
|
Jul-98
|
1,336.5
|
|
Aug-98
|
1,342.0
|
|
Sep-98
|
1,304.0
|
|
Oct-98
|
1,250.0
|
|
Nov-98
|
1,225.0
|
|
Dec-98
|
1,205.5
|
The aluminum price on
the LME had shown an uptrend since January 1997 with a price at
$1575/ton. Prices subsequently increased to $1710/ton in August
1997 in response to a demand growth in the US and other West
European countries. Prices thereafter started declining as a result
of the South Asian crisis. The US and the West European countries
account for 15 % of the total global aluminum
consumption.
Prices continued to
decline in each subsequent month from $1610 /ton in September 1997
to $1364 /ton in May 1998. Prices are estimated to have been
quoting at $1180 /ton in January 1999. At these prices, most of the
aluminum producers around the world would be hurt financially, as
their production costs are higher.
Indian aluminum
producers, Nalco and Hindalco had increased their respective
aluminum prices in response to the buoyant prices on the LME.
Hindalco Industries increased their primary metal prices from
Rs70,000/ton to Rs73,000/ton in April 1997. Another price hike was
announced in September when aluminum prices rose from Rs73,000/ton
to Rs76,000/ton.
However, a sharp
decline on the LME forced domestic primary producers to cut prices.
Hindalco started giving trade discounts to the tune of Rs3,000/ton
for all its aluminum products. Nalco has cut prices of both its
aluminum ingots as well as rods by Rs15,000/ton. Before the price
cut, Nalco use to sell its ingot at Rs70,000/ton while Hindalco
sold at Rs73,000/ton. This trend has continued till now. Any upturn
in domestic prices will be driven by LME trends.
