National Aluminium to Triple Capacity in Six Years (Update2)

Dec. 23 (Bloomberg) -- National Aluminium Co., India’s second-biggest producer, plans to almost triple production capacity in the next six years as demand rises in Asia, Europe and North America. Output of the lightweight metal may reach 1.25 million metric tons from 460,000 tons, Director of Production A.K. Sharma said in an interview. The company, which added 115,000 tons of capacity on Dec. 20, aims to put on another 180,000 tons in the next phase at its Angul plant in eastern Orissa state, he said, without specifying a timeframe. Aluminum, used to make cars, aircraft and beverage cans, climbed 45 percent this year in London as China, the world’s biggest producer and consumer, became a net importer and demand began to recover in the U.S., Japan and Europe. “National Aluminium’s volume growth, coupled with the rise in aluminum prices, will lead to earnings expanding in the next financial year,” said Sumeet Singhania, who has a “hold” rating for the shares at Antique Stock Broking Ltd. in Mumbai. “We may revise our rating to ‘buy’ soon because of the capacity and price increases.” National Aluminium shares closed 4.5 percent higher at 392.1 rupees today in Mumbai, rising the most in almost five months. The benchmark Sensitive Index of the Bombay Stock Exchange gained 3.3 percent. Global Production The world aluminum market may expand to as much as 45 million tons by 2012, Macquarie Securities Ltd. said last month. Global production last year reached 38.76 million tons, according to data on the Bloomberg. China’s imports of refined aluminum swelled 1,245 percent to 1.45 million tons in the first 11 months of this year, while exports slumped 71 percent to 18,609 tons, according to government data. Aluminum production in North America fell 17.9 percent this year, according to data from the International Aluminum Institute. Output fell 19.5 percent in West Europe and 11.6 percent in East/Central Europe, while production in Asia, including India, rose 11.8 percent. Shuttered Capacity United Co. Rusal, the world’s largest aluminum producer, and rivals Rio Tinto Group and Alcoa Inc. cut output this year as the worst postwar recession drove commodity prices lower. Rusal doesn’t plan to restart shuttered capacity while demand is recovering, Chief Executive Officer Oleg Deripaska said Dec. 3. “Declining capacities in North America and Europe because of rising input costs and expectations of an increase in per capita consumption of metals in China and India will help us,” Sharma said yesterday by telephone from Bhubaneshwar, where National Aluminium is based. National Aluminium said yesterday it raised prices by 2.9 percent, the third increase this month, after the metal rose in London trading. “Going forward, prices may rise further due to better demand,” said Giriraj Daga, an analyst with Khandwala Securities Ltd. in Mumbai. “I am positive on the company, but given the fundamentals the valuation looks expensive.” Delays in securing approval from the Orissa state government for new projects and attacks by Maoist rebels on its workers and facilities may hinder the company’s plans, said Daga, who has a “sell” recommendation for the stock. The company has sought 250 acres of land from the state government to expand its Angul facility, which will include a 240 megawatt power plant, Sharma said. Following the 180,000 ton capacity addition, it plans to add a further 107,000 tons, Sharma said. Work on a 160 billion rupee ($3.4 billion), 500,000 ton smelter at Jharsuguda is expected to commence in June 2010 after a setback of more than a year because of delayed state government approvals, he said. The company may have to tap the market to fund the project that will include a 1,250 megawatt power plant, he said, without giving details. “The state government may complete the environment impact study of the project in about five months after which we can expect an approval,” Sharma said.