Nalco CMD expects lower costs of production and higher alumina price to drive profits in FY19

In an interview to Economic Times, TK Chand, CMD, Nalco, says he expects the shortage in aluminium market to continue and the alumina and aluminium prices to remain bullish.  According to him, in Q1 FY19, the company’s profit and EBITDA trend will continue to remain higher due to higher average realisation of alumina. While in Q4, the average realized alumina price was around $400 per tonne, in this quarter it is expected to be about $540.

According to him, though realized alumina prices have corrected from about US$600-700 per tonne in April to about US$490 currently, the prices are going to remain strong at a range between US$475 and US$525 per tonne. Brazil alumina supply is still uncertain because of the Alunorte capacity closure issue and the market would remain tight. The alumina market is expected to be in deficit in the next quarter and continue in 2018, while easing out a little in 2019.  

In case of alumina, Mr Chand says, Nalco is looking at making spot contract instead of long-term contract because of the good current pricing and the order position is very good.  Aluminium prices are currently 10% to 15% higher than last year’s level despite the recent fall and alumina prices in the international market is quite good.  This will drive the profit for Nalco in the coming quarter and year.  For the cost part, he says, NALCO is one of the lowest cost alumina and bauxite producers in the world, giving the company an edge over other suppliers in making a higher profit margin.  

The company expects bauxite production to be little more than the 100% in FY19. The company targets an alumina production of about 2.15 lakh tonne or 2.2 lakh tonne in the next financial year.