Weekly Update 1: COVID19 effects on global aluminium industry during April 1-10

Right from the aluminium raw material to the end-use sector, the effect of COVID19 pandemic is evident in every vertical of the industry. Unavailability of adequate labourers and transport disruption due to the worldwide lockdown is taking a constant toll on the aluminium industry, resulting in production cut at many smelters and semi-finished products plants. Therefore, the demand for the metal is drowning, and so the global benchmark prices of both aluminium and aluminium input costs.

Let us here take a quick glance at how the COVID19 outbreak has created an impact on the aluminium industry in the last 10 days of the month.

• The Argentine giant Aluar Aluminio Argentino SAIC is reducing its output by an additional 25% at its Puerto Madryn plant in the south, in response to the indication of the global slowdown of light metal production.
• Hydro has postponed the restart of 95, 000 tonnes capacity at the Husnes aluminium plant in Norway. The ramp-up, which was planned to start in the first half of 2020, is now postponed to the third quarter of 2020 at the earliest. Also to combat the situation, the company has decided to freeze around 25 percent of remaining capital expenditure in 2020 by NOK 2 billion. To reduce cost across the company, Hydro has come up with forced vacations, delaying projects, and temporary layoffs.
• Aluminium Corporation of China Limited (Chalco) may carry out maintenance or even shut some of its aluminium production, in case aluminium prices fall below the company’s cash costs.
• US$ 2 billion Sinohydro Bauxite deal in Ghana could delay further. Ghana Center for Democratic Development (CDD-Ghana) declared that: “outbreak of COVID- 19 is currently hitting Ghana’s economy as there are indications that aspects of the Sinohydro deal will be delayed.”

• China’s aluminium exports are expected to come down further, as Vietnam, a major buyer of Chinese aluminium, has entered into 15 days nationwide isolation in the first week of this month. In the first two months of 2020, China’s unwrought aluminium and aluminium products already dropped by 25.2 per cent year on year, as precautionary measures against COVID19 forced aluminium processors to delay resumption from the Lunar New Year.
• Arconic is executing mitigation measures with immediate effect that are estimated to reduce operating costs by approx. $150 million on a yearly rate basis. 
• Rio Tinto is considering suspending production at its Straumsvík smelter in Iceland for two years, as an option to reduce its losses during the economic downturn due to the coronavirus pandemic.
• Airbus, Europe’s largest manufacturer, has announced to steeply cut production from its best-selling A320 single-aisle jet to 40 per month from 60 per month previously, assembled in Toulouse and Hamburg. The production of the A330 will also be reduced to two a month and the A350 jet to six a month.

• Liberty British Aluminium, Britain’s only remaining aluminium smelter, is supporting the fight against COVID-19 by making metal for NHS oxygen bottles. Metalex staffs are also presently working overtime at its sites in Poole, Horsham, Birmingham, Chepstow and Milton Keynes to process the orders for aluminium plate and bar billets to be used in the rapid production of medical equipment.

However, amidst the crisis, National Aluminium Company Limited (NALCO) announced on April 1 about its three-sixty degree success in bauxite and alumina productions in the fiscal year 2019-20. By utilizing its full capacity at Panchpatmali mine, NALCO achieved bauxite production of 7.30 million tonnes, the highest ever production. Nalco’s alumina refinery also raised the bar by reaching its highest ever production of 2.16 million tonnes of alumina hydrate. The aluminium smelter of the company recorded 90% utilization with cast metal production of 438,000 tonnes in spite of facing an acute coal crisis in the monsoon season and the ongoing coronavirus pandemic.

But as far as the Indian automobile industry, including components, is concerned, CRISIL estimates a very low chance of recovery from the COVID19 pandemic, until the financial year 2021.