See aluminium price hold above USD 2400/tonne: Nalco

Below is the transcript of Ansuman Das's interview with CNBC-TV18's Latha Venkatesh, Sonia Shenoy and guest editor Abhay Laijawala, MD & Head of Research, Deutsche Equities India.Abhay: It is good times for aluminium at this point in time. We have seen LME aluminium prices rise quite sharply. In fact last night LME was at around USD 2100 per tonne. Before we go to LME aluminium I would like to discuss the alumina outlook with you. We have seen a big jump in LME aluminium prices but we are yet to see the increase in alumina prices. We have seen alumina prices move to about USD 325 per tonne. What is your view on the alumina pricing outlook?A: As far as the spot alumina prices are concerned it has not moved up as much although it has gone up a little bit. In fact Nalco has been realising close to about USD 345 per tonne in the spot sales.As far as the term contracts are concerned the alumina prices moved up along with aluminium prices. With aluminium prices going to a level of about USD 2100 per tonne and since we get about 18 percent of the LME as the alumina prices, our term contract realisations are much better today. It is in the range of about USD 370/tonne. Going forward I feel that alumina prices may not move up sharp but they are going to be stable and will continue to have a little bit of upward trend which its showing.

Abhay: Let us move on to LME aluminium prices. Most of the stakeholders in the aluminium space have been taken by surprise at the velocity with which the LME aluminium prices have risen. What is your view on the LME aluminium outlook and where do you see LME aluminium prices headed? A: As producers we look at price plus premium because our realisation is not only about the price, it is also about the premium that we get. The price of premium is close to USD 2500 per tonne. We get about USD 355-360 premium here but Japanese premiums are more than USD 400, European premiums have also gone up. Although the demand in China is not really going up in the way one expected it to, but the demand in rest of the world is still quite high. So, I expect the aluminium prices to be in the range of USD 2050-2150, it should be range bound but there will be little pressure on the premiums in the coming months. LME stocks have also started going down in the warehouses. So, I feel once the physical supply improves the premium may come down a little bit but altogether realisations for a producer could be in the range of USD 2450-2550 which is a pretty good figure. Particularly in India with focus on infrastructure and other sectoral growth including electricity I think the demand in the country is going to be quite high.

Abhay: Let me shift gears now from the global stage to what is happening in India. How do you see the coal situation in India and I am not referring here to what has happened as a result of the Supreme Court order but I am referring more to how the economy is moving back into strong momentum and with power demand growth which was close to zero now having moved to 8-9 percent the strangulated coal supply for the entire country is coming back into force and if there is not enough coal for the power sector how are the other end users like cement and aluminium for whom coal is a very critical raw material may say, what is the scenario over here? Will Indian aluminium producers need to import even more coal?A: I think it is a very important point that you touched leaving alone the controversies about the coal block and other things let me tell you coal is our lifeline. In aluminium industry coal, is our lifeline at least in this country where thermal power is the major source of power.The total cost of production of metal if one looks at the variable cost of production of aluminium metal close to about 22-23 percent is coal alone. Presently, what all of us are trying to do is minimise import and try to rely on whatever coal we are getting through the fuel supply agreements.

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