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February 19, 2001 Aluminium Sector Update – February2001 Aluminium production slowing down…. Aluminium production grew by just 2.3% in December 2000 as compared to agrowth of 10.4% in the same period last year. In November 2000, the production was up by7.6%. For the period April-December 2000, the production has increased by 6.1%yoy asagainst the 15.3% growth exhibited in the previous year. The main reason for slowing downof aluminium production growth is the decrease in demand from the automobile industry. Table 1: Production (in tonnes) Production Dec-00 Dec-99 % Change Apr-Dec 2000 Apr-Dec 99 % Change Aluminium 55933 54693 2.27 485106 457134 6.12 Source: Industry Chart 1: Aluminium Production Source: Industry Aluminium prices firm up Aluminium ingot prices in Mumbai continue to remain firm. The averageprice of ingots during the first week of February was Rs 9650/quintal. The average priceof ingots during the period April-January of 2000-2001 was 7.6% higher than the averageprice during the corresponding period last year. Aluminium prices have rallied in the lastone month. While the macroeconomic factors are not conducive to a rally in prices,further likely closure of capacities in North America in the face of high energy priceshas pushed up aluminium prices. Chart 2: LME prices and inventory Source: Industry Q3FY01 performance Nalco’s net profit rose by 22% at Rs 1920.1mn against Rs 1577.6mn in the same period last year. The company has reduced the prices of some its products like ingots, sows and cast strips so as to protect its market share in the domestic aluminium industry. The net profit of Indal shot up by 119% to Rs 306.8mn as against Rs 139.9mn in the same period last year mainly due to improved production from most of its units and also a continuous focus on exports. Hindalco registered a net profit growth of 11.7% from Rs5,022mn in Q3FY2000 to Rs5,611mn in Q3FY01. 39% increase in exports from Rs751mn to Rs1,045mn has driven the profit growth in this quarter. Exceptional performances of Chemicals and Sheets division have helped drive export volumes. Table 2: Q3FY01 (Rs mn) Name of the company Sales Operating profit PAT Nalco 5742 3394 1920 Indal 3253 698 307 Hindalco 5611 2975 1700 Source: India Infoline Stock Market performance In the last one month, the India Infolinealuminium index has given a return of 6%. Hindalco (3.6%) and Indian Aluminium (4.9%) werethe major gainers. There was a rally in the old economy sectors particularly the steel,banking, power and auto sector. Major news Indian Hindalco Industries is likely to go in for listing on the New York Stock Exchange (NYSE) in 2001. The Government has appointed PV Rao and Associates for undertaking the asset valuation of Bharat Aluminium Company (Balco), which is slated for privatization in the current financial year. US based Alcoa and Hindalco Industries are jointly bidding for the Union Government’s 51% stake in Bharat Aluminium Company. Sterlite Industries is also bidding for a stake in Balco. Sterlite Industries, which was considering the option of merging all its aluminium businesses has decided to put the plan on hold till the completion of privatization of Balco.  International Alcoa Inc., the world's largest aluminum producer has set a new $1 billion cost reduction target, which it aims to achieve over the next three years. It has also completed the sale of Reynolds Australia Alumina, Ltd. LLC, which holds a 56% interest in the Worsley alumina refinery located in Western Australia. Kaiser Aluminum Corp. has posted a wider-than-expected loss in the fourth quarter, citing high energy costs and weak demand. The Houston-based company reported a loss excluding special items of about $14.5 million, or 19 cents a share, compared with a loss excluding special items of about $9.5 million, or 11 cents a share, in the same period last year. French aluminium and packaging group Pechiney posted strong growth in 2000 sales and profits, fuelled by firm demand, high aluminium prices and favourable exchange rates. The net earnings for the year increased 21% to 314 million euros ($296.2 million) from the 1999 level of 260 million euros, as total sales pushed 12% higher to 10.68 billion euros.

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