The sharp correction in alumina prices followed lifting of sanctions on UC Rusal by the US treasury and Norsk Hydro’s Alunorte refinery in Brazil ramping up production. Historically, alumina in the global markets has traded at 14-15 per cent of the spot aluminium prices. However, the supply shocks in calendar 2018 emanating from levy of sanctions on UC Rusal spooked the markets, leading to alumina prices rising to 30 per cent of spot aluminium price level. But the consistent slump in prices in calendar 2018 has led to alumina prices again falling to the level of 16 per cent of spot aluminium prices.
As per a report by Icra, Vedanta Group
which imports a sizeable quantity of alumina from the international market, is likely to benefit from lower alumina prices in the form of lower cost of production. On the other hand, Hindalco, an integrated aluminium producer with a small share of external alumina sales will not be impacted by falling alumina prices.
Though Hindalco did not suffer directly from soft alumina prices, the company’s revenues and Ebitda (earnings before interest, taxes, depreciation and amortisation) from aluminium operations alone were down both in Q2 and April-September period owing to lower realisations stemming from slowing aluminium consumption. Hindalco’s Ebitda from aluminium business (including Utkal Alumina) was down 38 per cent in Q2 of FY20.
despite being an integrated player was negatively impacted from fragile alumina prices. The navratna company posted a rare quarterly loss of Rs 28 crore in Q2 as tepid realisations from alumina exports and higher power costs crimped margins. Each year, Nalco
ships over one million tonne of surplus alumina to its overseas customers.
Going forward, Icra expects the surplus in international alumina market to increase, with prices headed for a further correction.