Indian aluminium has been witnesseing higher premium on metal exchanges abroad including London and Japan on reports of Indian producers facing problems at their plants. This, however, may not augur well in the long term, analysts say.
Global, India is seen as one of the most cost effective producer for aluminium across all markets. Therefore any fluctuation in production immediately shows up on the global price chart. The two major aluminium producers in India - Hindalco and Nalco - are among the lowest cost aluminium producers in the world.
Last week aluminium premiums, especially in the south Asian markets escalated on the back of rumours that these have faced production problems.
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There also was an increase in demand from China and Japan. Cumulatively this squeezed supplies coming into markets.
Indian and Chinese aluminium have been commanding a premium of about $15 to $17 at the London Metal Exchange (LME) as opposed to $12 to $15 in the previous week. These two countries form a large consumption chunk.
Purchases orders from these countries including India is pushing premiums higher, due to the additional pressure on production.
On the London Metals Exchange, a key indicator for the aluminum industry, mid-October prices slipped to 59.1 cents a pound, near its lowest level in three years. A year ago, the price of aluminum was 62.8 cents a pound, and in 2000, it hovered around 70 cents a pound for the year.
Global aluminium producer inventories fell to a five year low in February 2002. The total inventories, including unwrought aluminium, unprocessed scrap, metal in process and finished semi-fabricated form amounted to 2.95 million tonne in February 2002, down by 0.26 million tonne from the inventories in the same period of the previous year. The opening stocks on the LME on 23rd October were at 12,79,600 million tonnes .
A report by HSBC on price prospects has revised price estimates for this year at $1,235 per tonne against previous estimates of $ 1,4999 for 2003 and $ 1190 against $ 1,398 for 2004. Indian aluminium is expected to track global price trends as production patterns are intricately linked with global demand supply equations.
The rise of the middle class, massive infrastructure needs and spurt in FDI inflow have driven up the demand for aluminium in China. That country