Aluminium manufacturing companies like Nalco, Balco and Hindalco’s margins are likely to remain under pressure in the short term due to declining prices of aluminium in the London Metal Exchange and higher input costs.

A senior official at Nalco said that “We are offering discount of around Rs 2,500 on domestic published aluminium prices as the rates are lower on the London Metal Exchange. Aluminium prices on an average cost at around INR 130,000 per tonne in the domestic market while on the London Metal Exchange it is around USD 2,000.

According to research report by brokerage Emkay Global, prices of both ferrous and non-ferrous metals during the last fortnight ending June 1st 2012 have continued to fall, as global economic scenario remains uncertain particularly in Europe and China and also due to strong upward movement in US Dollar against a major basket of currencies.

Mr Goutam Chakraborty analyst at Emkay said that aluminium prices continue to decline on the global exchanges raising concerns for most of the global producers. During the fortnight ending June 1st 2012 the white metal shed another 3% to fall to USD 1937 per tonne, lowest on the LME in the past two years. The marginal cost for 50% of the global producers stands at USD 2,050 per tonne.

Mr Bhavesh Chauhan an analyst at Angel Broking said that “We are not bullish on the performance of aluminium companies like Hindalco, Nalco and Balco because there is acute shortage of coal. Coal prices are already high and further costs of companies have escalated as many of them are importing coal and rupee depreciation has made it costlier.”

Mr Chauhan said that the brokerage has a reduce rating on Nalco while on Hindalco and Balco it has a neutral rating. In the near term key catalysts are not there to trigger revival in aluminium prices and growth of the sector.

Mr Ravindra Deshpande an analyst at Elara Capital said that the performance of aluminium companies going forward would depend on availability of coal. The GoM in their latest meeting on May 30, gave conditional forest clearances for Mahan coal block, jointly owned by Hindalco and Essar Energy.

Mr Chakraborty said that “Though Cabinet would take the final call and the first output is not likely before two years, this boosts the investors’ sentiment from a long term strategic viewpoint.”

Source - Mydigitalfc.com

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