Subdued aluminium prices may put pressure on Hindalco’s operating income

Subdued aluminium prices may put pressure on Hindalco’s operating income Hindalco Industries claims that it would become more efficient aluminium producer once its three new projects start this year, but analysts are of the view that it will be a more stressed firm due to high exposure to LME aluminium prices.

Hindalco Industries' three new projects will be ready by the end of first half of 2013. Its 1.5 million tonne per annum (tpa) Utkal alumina project and 360,000 tpa Mahan project is expected to start production by April this year, while the Aditya alumina smelter is expected to be ready by June.

However, the subdued LME aluminium prices, the global benchmark, could pressurize on the operating income of the company's new projects.

An analyst with a domestic brokerage, who didn't wish to be identified, said, "For almost a year aluminium prices have remained under pressure in the range of $2,050-2,100 per tonne and that has been one of the reasons why the company had been going slow on its expansion as that would not fetch higher operating income from new projects."

The analyst said that high input cost and low LME prices kept the company's margins at nearly unimpressive 6 per cent, and the situation would not likely change much in the future.

The analyst added that the outlook for any of Hindalco Industries' expansions was not really good, unless LME aluminium prices surpass $2,200 a tonne.