Nalco bearish on aluminium rates

National Aluminium Company, India's second largest producer of aluminium, today gave a weak price outlook for the metal. "Aluminium prices are likely to remain weak in the near-term, and they are likely to settle at $2,600 a tonne," Director (Finance) B L Bagra said. Bagra said softened product prices are likely to squeeze the company's operating profit margins in the three months to June 30 by up to 300 basis points compared with the previous quarter.

However, the contraction in margin will be negligible considering the wide margins the company enjoyed, he said. Nalco's operating margins for January-March was about 64 per cent. Aluminium spot closed at $2,669 a tonne on the London Metal Exchange Monday, down more than $200 from the levels it reached early this year.

Nalco, which has twice cut aluminium prices during the current month, may consider another cut in July if LME prices are further strained, Bagra said.

Volatile prices of alumina, Nalco's other leading product, adds to the company's woes. The company is settling spot alumina contracts at $352 a tonne, and is expecting a price of $330-400 a tonne for one-year contracts, Bagra said. Alumina prices had peaked to $600 a tonne in June last year, and have been slipping ever since. Nalco hopes to tie up $250 million through external commercial borrowings in about two weeks, Bagra said. "We have received expressions of interest from leading banks, such as Citibank, ABN Amro, HSBC, Standard Chartered, SBI and ICICI Bank. We'll need to see who gives the best terms," he said.