Characteristics Of Aluminium

Aluminium is the third most abundant element in the Earth's crust. In nature

however it only exists in very stable combinations with other materials (particularly as silicates and oxides) and it was not until 1808 that its existence was first established.

Aluminum is light. Its density is only one third that of steel. Aluminum is resistant

to weather, common atmospheric gases and a wide range of liquids. Aluminum has a high reflectivity, and therefore finds more decorative uses. Aluminum has high elasticity, which is an advantage in structures under shock loads.

Aluminium keeps its toughness down to very low temperatures, without becoming

brittle like carbon steels. It is easily worked and formed. Aluminium conducts electricity and heat nearly as well as copper. Supply and Demand Global Scenario

Aluminium ore, most commonly bauxite, is plentiful and occurs mainly in tropical

and sub-tropical areas - Africa, West Indies, South America and Australia. There are also some deposits in Europe

The leading producing countries include the United States, Russia, Canada, the

European Union, China, Australia, Brazil, Norway, South Africa, Venezuela, the Gulf States (Bahrain and United Arab Emirates), India and New Zealand; together they represent more than 90 percent of the world primary aluminium production.

The largest aluminium markets are North America, Europe and East Asia. The global production of aluminium is about 27.7 and 28.9 million tons in 2003

and 2004 respectively.

China, Russia, Canada and United States produced about 6.1, 3.6, 2.64 and 2.5

million tons of aluminium in year 2004 respectively. Indian Scenario

India is considered the fifth largest producer of aluminium in the world. It is estimated at about 3037 million tonnes for all categories of bauxite (proved,

probable and possible). With the present level of consumption of aluminum, the identified reserves would have an estimated life of over 350 years. India's reserves are estimated to be 7.5 per cent of the total deposits and installed capacity is about 3 per cent of the world.

In terms of demand and supply, the situation is not only self-sufficient, but it also

has export potential on a competitive basis. India's annual export of aluminium is about 82,000 tonnes.

Indias annual consumption of Aluminum is around 6.18 lakh tons and is projected About a decade back, the primary Indian aluminium producers were BALCO,

to increase to 7.8 lakh tones by 2007. NALCO, INDAL, HINDALCO and MALCO. Of the five, two (BALCO and NALCO) were in the public sector while the other three were in the private sector

As a result of the process of liberalization of trade in aluminium, India has

emerged as a net exporter of aluminium, on competitive terms. Government monopoly, in terms of aluminium production, removal of price and distribution control over aluminium, has been diluted in favour of private sector. The ownership pattern in private sector has undergone changes. With the takeover of INDAL by the HINDALCO, it has emerged as the major producer of aluminium in the country. World Aluminium Markets

LME, TOCOM, SHFE and NYMEX are the important international markets that

provide direction to the aluminium prices.

Hindalco Ltd. :
Hindalco is Asia's largest integrated primary producer of aluminium and among the most cost-efficient producers globally. Our aluminium units across India encompass the entire gamut of operations, from bauxite mining, alumina refining, aluminium smelting to downstream rolling, extrusions and recycling. In India, we enjoy a leadership position in aluminium and downstream products. Our product range includes rolled products, extrusions, foils, primary aluminium ingots, billets, wire rods and aluminium slabs. Hindalco metal is accepted under the high-grade aluminium contract on the London Metal Exchange (LME) as a registered brand. We have also been accorded the Star Trading House status in India. Hindalcos integrated complex at Renukoot , in Uttar Pradesh, India, houses an alumina refinery, an aluminium smelter and facilities for the production of semi-fabricated products. Power is sourced from our Renusagar power plant, located about 45 km from Renukoot. The captive power plant located at Renusagar, Uttar Pradesh, with 10 power-generating units, has a current generation capacity of 742 MW. Excellent operational standards have ensured a consistent plant load factor of over 90 per cent. The integrated complex at Renukoot also houses a co-generation plant with a capacity of 37.5 MW. A new co-generation plant with a capacity of 41 MW has just been commissioned to meet the requirements of the enhanced post-expansion capacities. Other facilities include an aluminium smelter at Hirakud (Odisha) with a captive power plant and coal mine, alumina refineries at Muri (Jharkhand), and Belgaum (Karnataka), and rolling mills at Belur (West Bengal), and Taloja, Mouda (Maharashtra), foil rolling at Kalwa (Maharashtra) and Silvassa (Union Territory of Dadra and Nagar Haveli) and an extrusions plant at Alupuram (Kerala). A strong presence across the value chain and synergies in operations has given Hindalco a dominant share of the domestic value-added products market. In India, the company enjoys a leadership position in speciality aluminas and hydrates as well as in primary aluminium and downstream semi-fabricated products. As a step towards building the market for value-added products and services, we have launched several brands in recent years, namely, Freshwrapp aluminium foil, Everlast aluminium roofing sheets, Permashield aluminium waterproofing membrane sheeting, and Al Planet, an exhibition showcasing aluminium products for the construction industry.

Aluminium has room to rise The UN report highlights aluminium's 4.3 per cent price rise from January to October 2005 as pointing to demand exceeding supply in 2006, with consumption rising by 5 per cent and demand by 4.5 per cent. With LME stocks currently at less than 7 weeks of global consumption, many analysts agree. High energy prices have been a driving force in the aluminium sector, particularly since energy price increases have caused some producers to close down smelters, the report said. Alcan, for instance, will close two European smelters - France's Lannemezan and Steg in Switzerland - and Norsk Hydro is to close 22,000-tpy capacity at Hoyanger in Norway. LME stocks may be rising, but many feel this does not completely negate the bullish outlook. Cost pressures from both power and alumina prices are growing, and if prices were to fall, smelter closures and reduced capacity would limit supply and buoy prices. The alumina price has risen a lot and the market has latched onto that, so prices have been rising, even though stocks are up, says SocGen's Stephen Briggs. Copper traditionally responds early in a cycle, while aluminium and zinc respond in the latter stages. There is still more room for price rises in both aluminium and zinc, believes UBS's Robin Bhar.

Aluminium, the second most-widely used metal, lags other base metals such as copper in reacting to market momentum. Since early February, while prices of most industrial metals have gone up by 30-50 %, the white metal has appreciated just 20%. The recent price gain was largely due to bulk buying from the Chinese state reserve bureau. The government body is assumed to have stocked substantial amounts of essential commodities at their historic lows. This explains the 65% rise in aluminium imports by China in March 2009 over its monthly average in 2008. Consistent oversupply reflected by the rise in inventory as well as declining demand, especially from the transportation sector, is expected to slow down price rise in the coming quarters, even as its counterparts are expected to ride on a recovery in the global equity markets. The demand for the metal largely comes from the transportation sector, followed by packaging and building & construction. While the state of the housing sector in many developed countries remains gloomy, the misery has been amplified by a sharp decline in global automobile sales. Moreover, the US monthly sales of automobiles consisting of domestic and imported cars and trucks dropped below the one-million mark in September 2008 for the first time in 16 years. While the growth in the US auto sales has been declining since 2006, the drop intensified in 2008, with an annual fall of 18% against an average of 2% in the preceding two years. Same is the case with Japanese exports, the worlds biggest auto exporter. Against an average rise of 3% in auto exports during 2004-07 , the countrys auto exports declined nearly 0.5% in

2008. During January-February 2009, the fall seems to have been steeper with an average monthly fall of 18%. The last four years have seen a fall in aluminium consumption when compared with its production. While the refined aluminiums use has increased at a compounded annual growth rate (CAGR) of 6.5%, the output has been at a higher CAGR of 7.5%. Moreover, since the supply responded slowly to the steep fall in demand, the global aluminium inventory today stands at an alltime high of more than 3.5 million tonnes, indicating a large glut. It is estimated that production cuts announced so far stand at 2.5 million tonnes out of which China, one of the top producers of the metal, has contributed little.

Recent developments in China add further to concerns of oversupply. Earlier, the Chinese government was against the development of energy intensive aluminium industry. However, as a response to economic slowdown, Beijing has not only reduced the export tax on aluminium products from 15% to 5%, but also has started offering energy subsidy to producers. As a result, an increasing numbers of Chinese smelters are restarting their production facilities. On this supply backdrop, the demand from China, the worlds largest consumer of aluminium, has been estimated to have grown 8% in 2008. This is in contrast with an average growth of 25% in demand in previous three years. Moreover, for 2009, the demand growth is expected to fall to as low as 3%. Thus, the supply overhang is expected to cloud the prices in the near to medium term while the upside risk to prices could come from a turnaround in global economy as well as a rise in energy costs since the cost of production is highly correlated to energy prices. At $1,468 per tonne, the current LME (three month) prices are up 14% from their February lows. While aluminium prices are expected to witness immediate support at $1,350-1 ,400, the $1,550-1 ,650 range could act as a resistance on the upside. For the long-term perspective, while a breach of $1,250-1 ,290 on the downside could set off a severe price decline, $1,750 is expected to resist upward movement.