Aluminium prices stay flaccid despite global spike

Aluminium prices despite staying bullish overseas have not appreciated much in the domestic market. The poor man's silver has stayed almost stagnant at Rs 85 a kg in the Mumbai non-ferrous metals market as of today compared with Rs 82 per kg a year ago.

A local trader said, "Generally, price movement in aluminium in the international market percolates down to India as well, but the scenario is slightly different today because of higher prices and shrinking margins."

Experts believe aluminium prices in the international markets are growing because of Alcan Inc's proposed closure of its Lannemezan, France aluminium smelter, which was expected to begin by next June.

The smelter produces 50 kilo tonne of aluminium a year, about 1 per cent of Alcan's primary metal production.

"International aluminium prices are expected to remain firm in the coming months, as China has been demanding this metal strongly for its use in infrastructure. Higher production costs - owing to tight alumina supply and rising energy costs - also support prices high in the international market," another trader said.

All aluminium consuming industries are growing robustly. However, industries such as transportation, packaging, construction/building, electricity and consumer durables, too, have witnessed significant growth - of approximately 10 per cent - last year.

"With innovations in consumption patterns keep emerging, demand for aluminium is expected to grow at the same rate, if not more," said an analyst.

Primary aluminium is processed into bars, rods, billets, plates, sheets, foils, etc that are used in a variety of products such as air-conditioners, refrigerators, aircraft (structures and engines), automotives (body parts and engines), bridges, food containers, drink cans, cooking and packaging foils, window and door frames for buildings and electric cables.

"Indian traders don't trade actively and buy only to meet consumption demand. They wish to wait and watch till prices normalise in the international market," another trader said.

India produces about 820,000 tonne and consumes approximately 750,000 tonne of aluminium per annum with an average consumption growth of 6-8 per cent.