Growing demand — both domestic and global — and China’s decision to curb output will impact prices of the metal
Global aluminium prices are likely to go up in the wake of growing demand at domestic and international fronts, coupled with China's step to slash production of the metal. According to Harbor Intelligence, a global consulting firm specialising in forecasts for commodities, aluminium prices could touch $2,700 per tonne in the first half of the next year.
But inventory levels and demand for aluminium will be the determining factor for prices. In the last month, inventories of the metal have dropped by 1.7% to 72,050 tonnes. However, after the continuous decline in the second week of October, London Metal Exchange (LME) inventories grew by 3,950 tonnes to 4.3MT.
BL Bagra, director, National Aluminium Company Limited (NALCO), in a recent interview, has said that due to low interest rates and warehouse charges, many companies have found it profitable to hold on to stocks. He also added that interest rates will be stable and large aluminium inventories will be seen till at least the beginning of 2011.
"Currently aluminium prices are about $2,300 per tonne which is slightly on (the) higher side," an analyst with Systematix Shares & Stock (I) Ltd told Moneylife, preferring anonymity. "I don't see prices going significantly up," he added.
Alcoa, the largest US aluminium producer, predicts that global aluminium demand will increase by 6% per year over the next decade.
Inventories of aluminium at the LME are steady at around 4.5 million tonnes (MT), which is much more than last year's inventories, shows LME data. Taking note of rising inventories, Alcoa curtailed its production by 20% to 25% in June.
According to Brook Hunt, a leading research firm, global oversupply of aluminium is seen at 1.5MT and 2.1MT in 2011 and 2012, respectively. Supply is set to exceed demand by 1.3MT this year and supply should match demand, at least in the next two years, added the firm.
"Inventory level in the global market is around 10MT-11MT and global aluminium consumption is somewhere close to 35MT... it means about 30% (of) yearly consumption is lagging in inventories," added the analyst from Systematix.
India's demand for aluminium is likely to grow in double-digits in the coming months as the metal's main consumers - the auto and construction sectors - are seeing high demand for their products. India's aluminium production in April-August rose 6.4% to 6,52,941 tonnes.
"Aluminium prices may show a slight drop in the short-term if the dollar is firm," said an analyst from a Mumbai-based research firm. "A weak dollar may push up prices of aluminium as it makes the base metal more attractive to non-dollar buyers," he added.
China's recent energy rationalisation programme would cut aluminium production in the country. Essence Securities Co has said that aluminium companies in Shanxi and Guizhou, which account for 6% of China's production, were told to cut capacity for four months.
The policy is being implemented in every part of China, says Essence. According to media reports, China's Jiaozuo Wanfang Aluminium Manufacturing plans to cut electrolytic aluminium capacity by 1,40,000 tonnes due to electricity shortages. The company produces 4,20,000 tonnes of aluminium every year.
Aluminum Corporation of China, China's largest aluminium producer, also says that supply would be more than demand and it expects global aluminium production to grow by 12% to 42.28MT this year, and consumption to grow by 20% to 41MT.
"China consumes 40% of global aluminium production. If Chinese companies are slashing their output significantly, then it will help Indian aluminium production," added the analyst who spoke to Moneylife.
Despite decline in profit in 2009-10, Indian aluminium major NALCO plans a Rs 6,000 crore capacity expansion project. With this expansion, the company would enhance aluminium capacity to 5.7 lakh tonnes and alumina capacity to 29 lakh tonnes. The company sees surge in demand from the auto sector and infrastructure activities in India, Europe and other countries.
However, Vedanta group's Sterlite Industries, which has contributed considerably to enhance India's aluminium production over the past few years, has put its expansion plan on hold following the environment ministry's order banning bauxite mining in the Niyamgiri hills, Orissa. The company has also decided to defer the start of its aluminium smelter capacity of 1.64MT per annum (mtpa).
Vedanta Resources had committed an investment of over Rs36,000 crore for the expansion project in Orissa.
In the past, companies have left out significant information like pending litigation against them from their red herring prospectuses. Coal India, however, was pulled up just for a typographical error
Has the Securities and Exchange Board of India (SEBI) been unduly harsh with Coal India Ltd (CIL) by asking it to give institutional investors an exit option because of a typographical error? (See: http://moneylife.in/article/81/10190.html).
A look at a few instances where such withdrawal notices had to be posted certainly suggests that is the case.
Moneylife unearthed four instances where SEBI had asked companies to give investors an option to withdraw their subscriptions from Initial Public Offerings (IPOs). They were MBL Infrastructures Ltd, Aishwarya Telecom Ltd, Anu's Laboratories Ltd, Aster Silicates Ltd and VA Tech Wabag Ltd. In each of these cases, the companies had left out significant information about litigation filed against them or complaints over non-payment. None of them pertained to something as trivial as a typographical error that does not affect the financials of the company.
In December 2009, MBL Infrastructures Ltd issued a notice saying that it omitted some information from its red herring prospectus (RHP) under the 'outstanding litigations and material development' section. The company said it did not mention in the RHP that it had been prohibited by the road construction department (RCD), Jharkhand, from participating in tenders in the state.
In the second instance, while MBL Infrastructures did provide information about a petition filed against it by Jan Kalyan Morcha, an NGO, it did not disclose its admission to certain damages to a road that it had constructed. It also failed to disclose the report and remarks of a five-member committee appointed by RCD pursuant to observations by the Jharkhand High Court to enquire into the reasons for the deterioration of the road.
Aishwarya Telecom claimed that it was a "bona fide mistake" on its part in not disclosing a case filed against it by Jaipur-based EL-Tronics before the District Consumer Forum III, Hyderabad. The company had to add a clarification in its RHP under the 'risk factors' and 'outstanding litigation and defaults' section. Aishwarya Telecom Ltd admitted that it diverted the delivery of the material ordered by El-Tronics to another client to meet "certain business urgencies", due to which El-Tronics filed a case against it.
Anu's Laboratories also failed to disclose information about litigation filed against it by Sunmoom Chemicals Pvt Ltd and had to add the same in its RHP under the 'outstanding litigations and material development' section in May 2008.
This year two companies - Aster Silicates and VA Tech Wabag - had to delay their IPOs due to non-disclosures in RHPs. In July 2010, Aster Silicates had to clarify and provide details of the allegations made by Balwant Jain and Sandip Bhandari against one of its promoters, Mahesh Maheshwari, in its RHP over pledging of shares.
In the case of VA Tech Wabag, it was found that the company provided wrong comparison about its financials and its peers in the RHP. While VA Tech Wabag provided its financials on a consolidated basis, for its peers it provided information on a standalone basis besides adding a note at the end of the table that all figures were on a consolidated basis. This was done with an intention to show VA Tech Wabag in a better position than its competitors.
After SEBI sent a letter, the company had to delete the footnote. However, in the public notice, it said that VA Tech Wabag was not in a position to confirm whether the figures are on a standalone or a consolidated basis.
Looking at the above instances, why was CIL pulled up for a simple typo?
MLM company MAXFOREX has changed its name and website to ‘Dream Worldwide’, leaving many of its 'investors' high and dry
In May, Moneylife had reported on how a multi-level marketing (MLM) company was offering 'trading' in foreign exchange through a high-risk investment module.
Maximus Trades Inc (MAXFOREX), a Mauritius-based company, has now closed down its earlier website and opened a business under a new name, 'Dream Worldwide Inc'. The 'investors' who have been duped are now planning to join hands to nail the company.
All the details that MAXFOREX carried on its earlier site (maxforexonline.biz) have been replicated on the new site (dreamworldwide.biz). However, in its new avatar, the company is claiming that it trades in real estate and diamonds - besides forex. All the information that was there on the erstwhile MAXFOREX site - founders, offices and the business model - are the same. Just the moniker has changed.
What could have forced the company to change its name and website all of a sudden? There has been an upsurge in complaints about MAXFOREX all over the Internet, as well as the reports that Moneylife has carried. Even 419scam.org, the site that tracks spam and scams on the Internet, has labelled MAXFOREX as a Ponzi scheme and provided the MLM company's bank account details. According to the website, MAXFOREX had an account (28037304495) with Barclays Bank at Mauritius under the name of Maximus Trade Incorporation.
For both maxforexonline.biz and dreamworldwide.biz, the domain registrar is Ranger Registration (Madeira) LLC. Even the status of both the sites on Who.is is the same - "clientDeleteProhibited, clientRenewProhibited, clientTransferProhibited, clientUpdateProhibited" is what the site throws up.
Another company, Royal Forex Trading Ltd, which claims to offer trading in forex and commodities, has now surfaced. Royal Forex plans to focus only on the US and India. It claims to offer 1% return per day on an 'investment' of $20 to $99 for 200 working days. The higher your 'investment', the more will be your returns (3.5% per day for a plan of $2,000 to $10,000 for 60 working days). In addition, it also offers 'rewards' (mobile phones, cars) on business worth $5,000 and above. However, it also fails to specify or clarify how it manages to offer such returns.