Aluminium softens as commodities slide
MUMBAI : Price of aluminium, the metal used widely in transportation, consumer durables and power distribution industries, has been reduced by Rs 10,000 per tonne from March 20, in line with international trends as commodity prices globally have declined after the US Federal Reserve cut interest rates.
The cut, the third price revision in March and the fifth in two months, has been the most sharp so far, say traders, adding that the trend is more due to investment strategies than traditional supply-demand fundamentals.
Nalco, the state-owned aluminium company, took the lead as always, by cutting price of ingots last week by Rs 10,000 to about Rs 130,000 per tonne, underscoring a departure from earlier tradition when aluminium prices were revised monthly. Aluminium prices have been changed on March 11 and 1, and earlier on February 16 also.
“International prices of aluminium have been fluctuating and it’s very difficult to pinpoint any particular reason for that,” Nalco chairman CR Pradhan told ET. “But supply demand factors and hoarding to some extent are being attributed,” he added, ruling out any speculative activity.
Nalco, which is Asia’s largest alumina maker, has the capacity to manufacture 345,000 tonnes of aluminium metal in a year. Apart from Nalco, other aluminium producers such as Hindalco Industries and the Sterlite-controlled Balco too reduced prices after the cash settlement price on the LME declined sharply to about $2,850 per tonne from $3100, after investors pulled out funds from metals, crude and gold post the Fed cut rates and after funds were shifted to equity markets.
Although executives in Hindalco, India’s largest aluminium and copper company, declined to comment on the price cut, sources said the move was inevitable after the sharp fall in the LME. “We are following international trends,” they said. Balco executives too confirmed the cut.
“Metal prices are mainly driven by liquidity,” explains Sanjay Jain, a metal analyst with Motilal Oswal. “Prices of aluminium had risen sharply in the past two months and a correction was inevitable,” he said, adding that the Mumbai-based brokerage expects further correction in the metal, to about $2,500 per tonne.
Metal price trends have been in line with global commodities price movements. Gold, which had reached a record high of $1,030.80 an ounce last week, fell to a one-month low of $904.65 an ounce. The yellow metal, which was considered a safe haven compared to credit troubles in the US, was dumped by investors after the Fed cut interest rates by 75 basis points.
Similarly, crude oil was under pressure, dropping to about $100.33 per barrel as investors feared a slowing US economy would affect consumption. Shares of metal companies too reflected the concerns. Hindalco which ended on Monday down 0.7%, has shed 21.7% in the past month to Rs 153.85. Nalco, on the other hand has fallen 10.7% in one month to Rs 478.25 on the BSE.