Wednesday, February 24, 2010

'India can become a powerhouse in aluminium'
  • The Indian aluminium market is growing at a rapid pace and it is one metallic industry where India can emerge as a powerhouse within the next decade, said a spokesperson of Vedanta Aluminum Ltd, a leading producer of metallurgical grade alumina and other aluminium products in the country. 
  • According to industry sources, India with total bauxite reserves of about 3 billion accounts for almost 7.5% of the world’s 65 billion bauxite reserves and is ranked sixth among the countries with highest bauxite reserves. 
  • Indian bauxite reserves are expected to last over 350 year with proven and probable reserves are estimated at ~1200 Mt. 
  • Currently all the major Indian producers are trying to make good the opportunity by expanding furiously. China, which has doubled its aluminium capacity over past half decade to account for more than a fifth of the world's output, is a net exporter of the metal. 
  • The Indian aluminium market is growing at a rapid pace, yet per capita consumption is extremely low: With over 7% growth per annum, one of the highest in the world, the Indian aluminium market is booming. Even better, sectors that extensively use aluminium are themselves booming, ensuring that this sector stays firmly on the growth path for times to come. Total aluminium consumption in the country is around 1,100 KT at present, which has grown significantly from 2002 level of 600 KT. 
  • India's per capita consumption of aluminium stands too low (under 1 kg) comparing to the per capita consumptions of other countries like the US & Europe (25 to 30 kgs), Japan (15 kgs), Taiwan (10 kgs) and China (3 kgs), the demand is growing. 
  • In India, the industries that require aluminium mostly include power (44%), consumer durables, transportation (10-12%), construction (17%) and packaging. "With one of the world's lowest per capita consumption, the country’s aluminium demand is set to explode,” said the Vedanta spokesperson. 
  • India is the eighth leading producer of primary aluminium in the world, with total production amounting to over 1,200 KT. However, the aluminium capacity in the country is only 5% of the world total, despite having the world’s 7.5% bauxite reserves, indicating the scope and need for new capacities in the country. 
  • Domestic aluminium production in India sufficiently meets the demand. Production of 1,200 KT is well consumed domestically with demand accounting for over 1,100 KT. With production surpassing the consumption marginally, India, at present, is a net exporter of aluminium. 
  • India is set to become 4th largest producer from current 8th displacing Norway, Brazil, Australia and Canada. 
  • India is already amongst the lowest cost producers in the world with Hindalco and Nalco already known as some of the lowest cost producers in the world. India's low costs can be largely attributed to the easy availability of bauxite. 
  • At present, cost of aluminium production in India is about $1500 per tonne compared to the world average of $1,600 per tonne. 

Stocks to concentrate:
Being one of the lowest cost producers in the world, Indian aluminium companies are set to benefit fully by growing demand from Power as nearly 40% of 11th 5-year plan expediture was dedicated for Power. Construction activity is expected to rise as GDP growth recovers and Consumer Durables are witnessing good figures after recent stimulus packages. Railways have stressed on Aluminium coaches and that can be one more trigger for growing demand.
HINDALCO has formed a V-shaped bottom in weekly graph and shows bullish formation also which makes it a compelling buy for investors after recent correction. 
NALCO has corrected nearly 30% from its peak and looks near support. Both HINDALCO and NALCO one can accumulate as long term investment.

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