Global aluminium demand will outstrip supply in FY2016: Debu Bhattacharya, Hindalco MD
Hindalco MD Debu Bhattacharya says the company is placing hopes on aluminium prices and high premium value added products in the coming months.
Last time we met, you said the worst is over, but nothing much has changed. What is your view on the aluminum industry now? The worst is yet to get over. Of the 60 million tonnes produced in the world, 30 million tonnes is produced in China. Chinese GDP growth is the lowest in the last several years and this is having a major impact on aluminum LME prices like any other commodity. In such a case only companies with lower cost will benefit. Russians are benefitting as their costs are in rouble and earnings in dollars.
When do you see this reversing? While lower GDP growth in China is a negative for aluminum, there are other positives coming out. We believe in financial year 2016, globally demand will outstrip the supply. The sentiments are also strong at the moment. What we are seeing is that although there is sell off across commodities, aluminum has held firm. In fact it has moved up 3% since end of November when commodity index has fallen 13 per cent. It appears to me that aluminum is getting out of step and is a positive sign. CRU, a respected commodity watcher, is saying that the inventory will become from 95 days at present to 72 days by 2020. This means demand is outstripping the supply. All these tend to suggest that aluminum is getting out of step.
How is Hindalco navigating through this difficult environment? We would like to get more dollars per tonne of aluminum. So if I produce more value added products, I get more dollars per tonne. That is why we have put up capacities which are value added products and are imported today. Also we are hedging our aluminum upstream business which is very vulnerable to the LME prices with the value added products.
Is there any hope for Minimum Imports Price in aluminum imports like the government has implemented in steel recently which helped steel makers increase prices? Aluminum is an important sector as it provides huge employment. India with 7th largest aluminum reserves, aluminum industry can be a good support to the ‘Make in India’ concept. It has the potential of going from 20 lakh tonne capacity to 41 lakh tonne capacity. The aluminum association has made representation to the right people and I am sure appropriate action will be taken. I have been told the debt of the industry is around Rs 60,000 crore and there is a definite stress in the system.
Is there any plan to list Novelis separately? No. There is no such plan at the moment.