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Aluminium imports seen up on Balco strike

India's aluminium imports may rise in the next three to four months due to a virtual shutdown at the country's third largest aluminium company, Balco, following a two-week strike, analysts say.

They say it will be difficult for other aluminium producers to step up production in the short run or divert committed exports to the domestic market to bridge the demand-supply gap.

"It's difficult to change production parameters and targets in such a short period and return to the original level after a few months," said an industry official, who declined to be identified.

Analysts said imports could go up in the next three to four months to fill the gap but did not give any estimate.

Some 7000 Bharat Aluminium Co (Balco) workers went on strike on March 3 to protest against the government's sale of its controlling stake in the firm to Sterlite Industries.

Balco runs a 100,000-tonne-per-year aluminium smelter at Korba in Chhattisgarh.

The strike is the first big test of the government's plans to rev up privatisation, a key plank of its economic reforms programme.

The Balco management has said the shortage of workers had affected maintenance work at the plant's smelter.

"Status quo continues. Metal in all the 408 pots has long solidified. The extent of damage will be known after we start reviving the smelter," C W R Deoras, general manager (works) of Balco, said on Thursday.

It would take three to four months to revive the plant, he said, adding that the losses would be about Rs 1 billion.

"We have been appealing to the workers to come to work but so far they have not responded," Deoras said.

PRODUCTION LOSSES

Analysts said a three-to-four month closure could lead to production losses of around 25,000-30,000 tonnes which could be met by an increase in imports and some adjustments in domestic supply.

India imports 65,000-75,000 tonnes and exports 115,000 to 130,000 tonnes of aluminium every year.

Major importers of the metal are semi-fabricated products and aluminium conductor manufacturers. Aluminium is also imported by those traders who get duty benefits for exporting value-added products.

The country's total annual production is estimated at about 620,000 tonnes and demand at 565,000-570,000 tonnes.

Analysts say domestic producers could hike aluminium prices to take an advantage of the situation because landed costs of imported aluminium are high compared with domestic production.

"There is a difference of Rs 15,000-20,000 between domestic prices and the landed cost of imported aluminium. It gives enough cushion for producers to hike prices," an analyst with a leading credit rating agency said.

There is a scope to increase domestic prices by five to 10 per cent, said Prem Nath, manager (base metals) at the Bank of Nova Scotia.

Domestic producers revise aluminium prices twice in a month.

India imposes a 25 per cent basic customs duty on aluminium imports but the effective rate of the duty, including other levies such as special additional duty (SAD), is about 51 per cent.

The country's largest aluminium maker, Hindalco Industries, operates a 242,000-tonne smelter while state-run National Aluminium Co (Nalco) has a production capacity of 230,000 tonnes per annum. Both the firms are approved by the London Metal Exchange (LME) for their exports.

Nalco exports about 100,000 tonnes of aluminium in a year while Hindalco's exports varies from 15,000 to 30,000 tonnes, analysts said.

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