Hindalco expects cost of production to be flat in third quarter as coal prices firm up

Hindalco Industries' aluminium segment reported an EBITDA (earnings before interest, taxes, depreciation, and amortization) of $750 per tonne for the quarter ending September 2023. However, the Aditya Birla Group anticipates a steady EBITDA per tonne for the next quarter.

Satish Pai, the Managing Director, attributed the third quarter projection to stabilisation in coal prices, clarifying that the previous quarter's EBITDA was influenced by a 15% reduction in coal costs. Despite the ongoing firming of coal prices in Q3, Hindalco expects production costs to remain stable, maintaining the EBITDA per tonne at the same level as in the previous quarter.

His remark came as in the Indian aluminium segment, Hindalco’s upstream business EBITDA was ₹2,074 crore, up 7% QoQ and downstream EBITDA was ₹171 crore, an increase of 16% QoQ due to higher shipments in the September quarter.

Reflecting on the London Metal Exchange (LME) price outlook, Pai said, “Prices will hover near $2,200-2,300 per tonne till the macroeconomic environment gets clearer, people get more comfortable with the US economy, interest rates, and Chinese demand. Most of it seems to be more on a positive trend.”

He, however, pointed to the war in the Middle East because of which risks remain and commodity prices, including oil, have been trending downwards. Therefore, LME supply-demand is very tight.

Hindalco MD also spoke about the firm’s US subsidiary Novelis, he noted that the October to December 2023 quarter shall witness a sequentially lower EBITDA per tonne because the third quarter falls between the holiday season and maintenance shutdown.

“Most of the large mills shut down over Christmas and New Year, which is why Novelis has guided $450 to $500 EBITDA per tonne for Q3. But in quarter four, it will bounce back very strongly. We are very confidently guiding the EBITDA per tonne to be $525 a tonne and the EBITDA to be about $500 million in quarter four,” Pai said.