National Aluminium's Profit May Fall on Lower Prices

Oct. 31 (Bloomberg) -- National Aluminium Co., India's biggest producer of alumina and the second-biggest maker of aluminum, said third-quarter profit will probably decline because of falling prices. Net income may drop unless aluminum prices rise to more than $2,200 a metric ton on the London Metal Exchange, Chairman C.R. Pradhan said today in an phone interview. Aluminum for three-month delivery on the exchange traded at $2,055 a ton at the close yesterday. The price of alumina, which brings in more than half of Nalco's profit, has also been ``hit,'' Pradhan said. National Aluminium, or Nalco, lowered prices three times this month as the global economic crisis and a deepening credit crunch eroded demand for aircraft, passenger cars and other products that use aluminum, made from alumina. Maintaining profit growth this quarter will be a challenge for Nalco as demand from China, the biggest producer of aluminum, wanes, analyst Niraj Shah said. ``Nalco and its peers are witnessing a slowdown,'' said Shah, who has an ``accumulate'' rating on the shares at Centrum Broking Pvt. in Mumbai. ``Metal prices are sliding and are unlikely to show signs of a recovery soon.'' Alumina prices have slumped almost 13 percent to $315 a metric ton this month, according to data provided by U.K.-based Metal Bulletin Plc. Alcoa Alcoa Inc., the largest U.S. aluminum producer, on Oct. 23 said it will reduce output at its alumina refinery in Point Comfort, Texas, by about 25 percent by the end of November because of the fall in demand. Nalco makes 345,000 tons of aluminum and 1.6 million tons of alumina annually. It requires 14,000 tons of coal daily to fire its 960 megawatt power plant. Electricity accounts for about 30 percent of costs for aluminum smelters. ``Higher costs have affected our profit in the second quarter,'' Pradhan said. Net income was little changed at 4.44 billion rupees ($89 million) in the three months ended Sept. 30 from 4.39 billion rupees a year ago, the company said in a statement yesterday. Sales climbed 17 percent to 16.76 billion rupees. The company was forced to lower alumina output, halving production for a 10-day day period to Aug. 4, followed by an output cut of 11 percent in September because of disruptions in coal supplies. Nalco shares, the second-worst performer in the past month on India's S&P CNX Nifty index, rose 11.3 percent to 163.9 rupees at 10:07 a.m. in Mumbai today. The benchmark Sensitive Index gained 6.7 percent.