Aluminium industry; Citybank N.A

Abstract

Aluminium is a versatile metal that can substitute materials like wood, steel, copper etc in many applications. It has certain unique physical and chemical properties that make it suitable for a host of applications. The metal has been put to around 2 5 ,000 uses. Aluminium is obtained from Bauxite after converting the ore to alumina. The process requires huge amount of power, which constitutes almost 40% of the cost of production of the metal. At present, the worldwide supply of aluminium exceeds the demand by 700,000 tons. The total installed capacity of production is 32 MM tons. Aluminium plants are located mainly in places that have cheap power, ego the Middle East, Norway and Australia. The international market price of aluminium has fluctuated widely over the last few years. It had reached a high of $ 2,5 86 per ton in 19 89, but currently it is priced around $ 1120 per ton. The major producers of aluminium in India are National Aluminium Company Limited (NALCO), Bharat Aluminium Company Limited (BALCO), Hindalco Industries Limited and Indian Aluminium Company Limited (INDAL). India is also aluminium surplus, the supply in 1992-93 being 487,000 tons against a demand of 400,000 tons. The Indian manufacturers were plagued by the high excise duty on the metal. However, this situation has improved after the 1993 Union Budget when the excise duty was lowered. The current metal price in India is around Rs 45,000 per ton. The growth in demand for aluminium in the expected to be around 7% per annum over However, this has not materialised. domestic market is the period 1990-95. The main user segments of the metal are the Electrical Sector, Consumer Durables, Transportation, Architectural, Canning & Packaging and Machinery, Equipment etc. The key risk areas of this industry are: 1. Competition from substitutes 2. Input Costs 3. Government policy 4. International price 5. Environment consciousness The following are the factors responsible for the success of a company in the aluminium industry: 1. Power Supply 2. Financial Strength 3. Productivity 4. Product Hix 5. Raw Materials Supply 6. Upgradation of Technology 7. Research & Development 8. Integrated Plants Based on the above Critical Success Factors, the players in the Indian aluminium industry have been Hindalco has emerged the clear leader of the pack followed by Nalco and Indal respectively. Since the demand for aluminium is a positive function of GNP growth rate, it is expected that as the world pulls out of the recession, the international metal prices will firm up and all the players will benefit. The situation in India is also expected to be favourable for the metal in the next two to three years. But a lot is contingent upon the performance of the Indian economy as a whole.