The script is running along expected lines.
At the start of the year, a section of the analysts following the Indian aluminum sector had forecast that the market could rebound and prices of aluminum could end up on a six-month high by the end of the quarter.
That’s exactly what seems to be happening.
A few days ago, the state-owned National Aluminum Co. Ltd. (NALCO) increased prices of all its products, including ingots and billets, by about US $92 (Rs 5,000) a ton. This was to bring the prices in line with international rates after the metal had gained on the LME.
NALCO is Asia’s largest integrated aluminum producer and other companies in India watch the company’s sales prices since they generally serve as an international benchmark. The basic price of standard aluminum ingots after the latest revision increased to US $2,674 (Rs 144,700) per ton.
This was the second time in as many months that NALCO has increased the price of its products. In January, it hiked prices by roughly $85. Clearly, the aluminum sector in India is on the rebound. NALCO has often resorted to a price hike to bring its products in line with the prices at the LME.
A report in The Financial Express quoted Mukesh Kumar, the CEO of another big aluminum producer, Vedanta Resources, as saying prices may rise because of processing companies replenishing their inventory to meet a rebound in demand. Kumar had predicted prices climbing to as much as US $2,300 a ton on the LME by March 31.
Prices are expected to keep rising well into 2014 since many feel that output capacities will be cut because of the backlog of the last two years, thus lifting prices. Adding to this is the revival of manufacturing activities in China and India, and expectations of better buying in the US.
For the Indian government, which holds a majority stake in NALCO, this is all good news. A few days ago, the Union Finance Ministry reiterated its resolve to sell off part of its equity in four public sector undertakings in the current fiscal year including that in NALCO.
The sale will probably take place in the first week of March after the union budget is presented. All these four PSUs are planned to be divested through ‘offer-for-sale through stock exchanges,’ also known as the ‘Auction Method.’
Proceeds from the sell-off (in the current year) would be used for funding capital expenditure in the social sector schemes identified by the Finance Ministry and the Planning Commission.
NALCO reported a net profit of about US $2.1 billion for the quarter ended Dec. 31, 2012, up 132 percent year-on-year.
Sohrab Darabshaw contributes an Indian perspective to MetalMiner.