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June 14, 2001 Aluminium Sector Update – June 2001 Aluminium production dips further…. The production of aluminium declined by 13% in April 2001 as compared to the corresponding period last year. This was the second consequent month of decline over production in the same month of the previous year. The production of April was the lowest production recorded in any month since October 1998. The main reason for slowing down of aluminium production growth is the decrease in demand from the automobile industry. Table 1: Production (in tonnes) Production Apr-01 Apr-00 % Change Apr-Mar 2001 Apr-Mar 2000 % Change (tonnes) Aluminium 44351 51023 (13.1) 643123 620845 3.6 Source: Industry Chart 1: Aluminium Production Source: Industry  Aluminium prices remain firm… Aluminium ingot prices remained firm in the Mumbai market with the average price during April-May 2001 being Rs 9607.5/quintal, a 6.6% increase over the average price during the corresponding period last year. Chart 2: Aluminium Prices (Ingot prices in Mumbai market) (Rs /quintal) Source: Industry  Chart 3: LME prices and inventory  Source: Industry Aluminium output declines… Due to the strike at Balco, there was a 3% decline in aluminium production during April to 44,351 tonne as compared to the target of 45,767 tonne. Nalco produced 18,405 tonne against the target of 18,900 tonne for April 2001. Indal, Hindalco and Madras Aluminium Company Ltd produced 3,574, 19,947 and 2,425 tonne against the targets of 3,623, 20,700 and 2,544 tonne respectively. The US annual rate of primary aluminium production decreased in May to 2,702,130 tonnes from 2,743,462 tonnes in April and from 3,857,805 tonnes in May 2000. A look at the FY01 performance FY01 Results (Rs mn) Name of the company Sales Operating profit PAT Hindalco 22754 11844 6781 Nalco 22589 12322 6536 Indal 12834 2659 1160 Source: India Infoline The net profit of Hindalco witnessed a growth of 10.7% in FY2001 to Rs 6781mn as compared to Rs 6124.1mn in the corresponding period last year. Net sales increased by 12% to Rs 22754mn as against Rs 20312mn in the same period last year. The increase in net sales and exports is attributed to better realization, improved product mix and increase in sales volume. Indal registered a net profit growth of 38% in FY2001at Rs 1160.1mn as against Rs 839.4mn in the corresponding period last year. The excellent performance in terms of topline as well as bottomline can be attributed to better capacity utilization, enriched product mix, thrust on exports, improved operating efficiencies and significant reduction in working capital. For FY01, Nalco has reported a growth of 28% in the net profit to Rs 6535.6mn as against Rs 5115.3mn in the corresponding period last year. Major news Indian Hindalco has asked for a fresh valuation for the 45,000 tonne per annum Hyderabad based Pennar Aluminium Company (Palco). The new management of the recently privatized Balco has decided to launch a VRS scheme in July. Nalco is planning to merge its wholly owned subsidiary, International Aluminium Products (IAPL), an export oriented unit with itself. Meanwhile Nalco’s disinvestment is to be completed in this financial year. The company, as part of its diversification plans would start trial production of zeolite at its newly built Damanjodi plant in Orissa at the end of this month. Indal is planning to focus on export markets this year and is aiming to double exports of fabricated aluminium products. It is all set to exit from Orissa Extrusions Ltd. International The government of China’s southern Guangdong province has tightened control over the import of Chinese aluminium, which had been exported to Hongkong. Alcoa Inc is idling its Ferndale (Intalco), Washington aluminum smelter as a result of agreements with the Bonneville Power Administration (BPA). The government on Monday approved the $29 billion merger of BHP Ltd. with resource giant Billiton PLC, clearing the last hurdle to creating the world's largest diversified resources company.     Sangeetha Subramanian

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