Billionaire Kumar Mangalam Birla’s Hindalco Industries Ltd. is evaluating expanding its aluminum capacity as global supply shortages and strong demand prospects push prices toward a record high.
Hindalco has concentrated on building its downstream aluminum business over the past few years, keeping its annual primary metal capacity steady at 1.3 million tons. Growing usage in electrification, electric vehicles and packaging have refocused the company on alumina and the primary industrial metal, according to Managing Director Satish Pai.
Aluminum, used in everything from window frames to auto parts, has jumped 16% on the London Metal Exchange this year, closing in on an all-time high of $3,380.15 a ton set in 2008.
“We believe that the LME has got strength over the next five years,” Pai said in an post-earnings call with analysts on Thursday. “I don’t know whether it’s going to stay above $3,000 for the next five years but it’s certainly going to stay at a reasonably good level because demand is strong and supply is going to remain constrained.”
China is also very clear on its ESG commitment and is not increasing capacity, Pai said.
“I don’t think that in the longer term there will be new supply coming in that easily,” he said. “So there could be strength in aluminum for the next few years and this is why we should evaluate” a potential expansion in smelter capacity, he said.
Hindalco will look to use renewable energy to power about 85% of any potential expansion and curb its carbon footprint, Pai said. The company will continue to build its downstream business, he said.
“We are now past the deleveraging stage,” Pai said. The company has a strong balance sheet and will be actively looking at growth projects, he said.
(By Swansy Afonso)
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