The outbreak of coronavirus in China hasn't affected the aluminium industry yet, but that could change if it lasts longer, said a senior executive of Hindalco Industries.
"The outbreak has had very little impact," said Satish Pai, Managing Director, Hindalco Industries, while addressing the media after the announcement of the company's third quarterly results.
"People in our unit in Changzhou have gone back to work this week, after the Lunar New Year holidays," he added.
The outbreak in China has claimed more than 1,000 lives and over 40,000 have been infected. It forced many of the industries to extend the New Year holidays.
Hindalco's unit was closed for a week more than planned.
Pai added that the outbreak, going by the present impact, could lead to a cut of up to 2 million tons in China's aluminium production.
China is the largest producer of the metal in the world, churning out over 35 million tonnes a year.
The coronavirus outbreak has led to fears of economic slowdown in the world's second largest economy, with much of the industrial activity taking a pause.
However, Pai added that the picture could change if the outbreak lasts longer.
"There could be a broader impact. There could be supply chain disruptions," he said.
Already, many of the ports in China have been quarantined, and Australia has restricted movement of commodities to the virus-affected country.
"Also, rates on London Metal Exchange could be impacted," said Pai.
Spot price of aluminium on the LME, he pointed out, has dropped from about $1,800 a ton, to about $1,270 a ton, since the outbreak was first reported.
"But if the virus is brought under control, then the prices could inch up," said Pai.
A higher spot price will be important for the country's largest aluminium maker to have a better fourth quarter.
In the third quarter, its consolidated net profit drop by 24 percent to Rs 1,062 crore, from Rs 1,394 crore, a year ago.
"We have seen some green shoots in December. Demand has picked up from sectors such as packaging and pharmaceuticals," said Pai.
The company will end up spending Rs 1,800 crore in capex in the financial year, compared to the original outlay of Rs 2,000 crore.
For the next financial year too, the capex is planned at Rs 2,000 crore. "The focus will be on downstream units," said Pai.
On the $2.6 billion acquisition of Aleris that was announced in July 2018, Pai said the company hopes to get clearance from the US authorities by March.
The deal has already got the green signal in China, but awaits the nod in Europe and the US. Mint
had reported that the deal, which was to be closed in January this year, could be delayed by three months.