Demand growth for aluminium to be about 15pct - NALCO

In an interview with ET Now, Mr BL Bagra CMD of NALCO talks about the aluminium demand and company's prospects.

Excerpts:

Q - How do you see the demand for aluminium in India for FY12 do you see it rising?

A - The growth of demand in India is mainly triggered by the power transmission industry and the investment in the power transmission is at the very fast pace. And therefore we maintain that the demand of growth of aluminium metal in India will still outpace the general growth rate in the economy. It will touch almost 13% to 15% of the growth rate. The other sectors which are emerging very fast are the transport and the packaging sector in India. In the transport, particularly the new generation cars due to fuel economy as well as the growing awareness about the fuel efficiency of using aluminium metal in the buses, trucks as well as in the railway wagons and passenger coaches that will trigger the demand and there is immense potential of such consumption in India. Therefore for the next even one decade we feel that the demand growth in India for aluminium metal will be in the range of 13% to 15% every year.

Q - Give us your outlook then on aluminium prices going forward, how are you seeing them kind of pan out?

A - Aluminum prices for the year, we expect that it should close in the range of 2500 to 2700 and at that expectation is best on two factors. One the consistent demand and the recovery what we are witnessing at a very slow pace but consistently in Europe and America in transport sector and another is a cost push factor. The prices of energy and carbon both have been going up over last one year as because of this cost push factor also the prices will be above USD 2500. And the year should close at an average of above USD 2500.

Q - So how would realizations pan out for NALCO in FY 2012?

A - Realization in India depends it is an interplay of the two factors the LME metal price as we discussed and another is the exchange rate of US dollar and rupee exchange rate. If the exchange rate is content around INR 45 plus minus then we will be having an average realization of 0.121 million per tonne to 0.125 million per tonne.

Q - But will interest rate hikes affect aluminium demand in the short term what is your opinion on that?

A - Not really, because the slowdown is not at a great pace and this may be only on a temporary phase. Auto sector and these domestic sectors do not contribute much to the aluminium consumption because largely it is power transmission in the industrial sectors. So the slight or very marginal slowdown in auto sector and the domestic sector is not going to make much of dent in the domestic consumption pattern. Second thing is, the India's total share in the global production is less than 2% so even if some production is still left out it is very easy to export that thing without affecting the realizations adversely.

Q - Give us details of the CAPEX plans choked out for the power and the aluminium verticals for the current fiscal?

A - This year we will be adding to our capacity to produce bauxite and alumina as much as by 30%. The bauxite capacity will increase from 4.8 million tonne and to 6.3 million tonne per annum and likewise the alumina production capacity will increase from 1.57 million tonnes to 2.1 million tonnes per annum. This is the last stage of the second phase expansion what we call and the both the expansion of the mine capacity for bauxite as well as the refinery capacity for alumina both will entail the CAPEX of 3200 crore. But largely of that has already been spent over last three to four years. This is the year where we are commissioning, this week itself we are commissioning the alumina refinery and enhanced production will start from the coming week.

So in the current year total CAPEX on these two items will not be more than 500 crore thus supply items, equipment etc. having already been paid in the previous years. But in this year other than this two additional capacity we have already taken up setting up an wind power project at the cost of 274 crore and we expect that this power plant will be commissioned before end of the current fiscal which will be of the 50 MW capacity. Other than that the usual replacement and improvement CAPEX will be in the range of 400 crore. So total CAPEX in this current year we are visualizing of 1100 crore.