The primary aluminium manufacturers and their counterparts in secondary re-melting industry have locked horns over an array of issues concerning the domestic market with imports and metal prices being the most contentious points, reports Business Standard.
Reacting to a string of allegations made by Aluminium Secondary Manufacturers Association (ASMA), the Aluminium Association of India (AAI) has written to the Prime Minister’s Officer (PMO), with a point wise rebuttal.
Responding to the allegation that primary producers are supplying in the domestic market at prices 14 per cent higher than international prices, AAI clarified that aluminium prices are linked with London Metal Exchange (LME) prices and regional product premiums which is the global benchmark for all aluminium producers worldwide.
“Aluminium exporters avail export benefits along with some credits for the duties/ taxes paid on inputs. So the net difference between export and domestic price in aluminium would be about 2-4 per cent and not 14 per cent. The above allegation has added premium and other charges like freight etc. to add up to 14 per cent only to misguide the readers”, AAI noted in the letter to principal secretary to the Prime Minister.
On allegations of the primary producers enjoying higher profit margins, AAI explained that being a capital intensive industry, the Return on Capital Employed (RoCE) will be a better benchmark since profit margins do not consider depreciation and high interest cost. At the current aluminium price of $1800 (per tonne), the ROCE is only 5-6 per cent against a cost of capital of over 12 per cent. That apart, the domestic aluminium industry is going through a tough phase and struggling to be cost competitive with production costs by Indian producers occupying the highest quartile in the curve. Also, reacting to ASMA’s contention that use of aluminium scrap is encouraged all over the world, AAI pointed out that globally large economies and countries with high aluminium consumption have laid down strict standards and guidelines for scrap recycling, usage and imports.