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    Aluminium players seek government salve to heal cost wounds

    Synopsis

    Aluminium producers have made investments of Rs 1.2 lakh crore to double the domestic capacity, from 2 million tonnes per annum (MTPA) to 4.1MTPA.

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    BHUBANESWAR: Indian aluminium players are seeking government intervention to mitigate an increase in costs that has negated any benefit that could be reaped from the record high global prices prevailing for the past few quarters.

    The Aluminium Association of India (AAI), which represents companies like Hindalco, Vedanta and Nalco, said domestic players have been burdened by an increase in raw material costs, largely because of coal availability and costs, which is forcing them to run below capacity.

    It is now faced with an “alarming threat” from increasing scrap imports. The association has sought an increase in duty and sops for raw materials so that it can benefit from aluminium’s great global run. While installed capacity is of 125% of the current demand, imports meet more than half of the domestic consumption.

    A $730-per-tonne increase in input costs — coal, alumina, caustic soda, and other cess and duties — has offset the $251-per-tonne increase in LME (London Metal exchange) prices of aluminium between Q4 FY 17 and Q3 FY18, the AAI said in a presentation to the government.

    Aluminium producers have made investments of Rs 1.2 lakh crore to double the domestic capacity, from 2 million tonnes per annum (MTPA) to 4.1MTPA. In the process, they have accumulated a combined debt of more than Rs 70,000 crore.

    The industry’s biggest challenge has stemmed from an increase in coal prices and a shortage of supply. The shortage in domestic coal, and in spot auctions in particular, affects 40-50% of aluminium capacity. Most of the players have plants in bauxite and coal rich Odisha and took yet another hit after a steep hike in electricity duty in May 2017.

    Domestic capacity outstrips the demand of 3.3 MTPA but current capacity utilisation is less than 70%, the AAI said. While the market share of domestic players is down from 60 to 47% on account of a 12% CAGR in imports.



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