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Surge in aluminium price may impact vehicle prices

Auto News - Published on Wed, 25 Apr 2018

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Economic Times reported that the sudden surge in aluminium prices may impact the Indian automotive industry's profitability, rating agency ICRA said that sanctions imposed by the US government on Russia’s largest and world’s second-largest aluminium producer RUSAL, the aluminium prices have surged by 30 % over last two weeks.

Besides, the sharp increase in aluminium prices will also impact the profitability of auto-component suppliers as well as OEMs in the near term, the rating agency asserted. This may also lead to vehicle manufacturers passing the cost pressure to the customers, thus may ensue into price hike by vehicle makers.

Mr Ashish Modani, Assistant Vice President, Corporate Sector ratings, ICRA said that “Already, automobile industry is grappling with commodity prices pressure over last one year, and this sharp increase in aluminium prices in recent weeks will further dent their operating profitability.”

The agency further said it expects industry-wide credit trends to remain stable, supported by robust demand from the OEM segment in the near term and healthy cash accruals, “Considering the increasing content per vehicle due to various technological advancement as well as regulatory measures, the growth in the auto component industry will be relatively higher than the underlying growth in the automotive industry in the medium to long term,” it added.

RUSAL’s biggest export markets are the US and the EU, which are also the biggest aluminium deficit markets with a reported deficit of 4.7 and 3.8 million tonnes, respectively.

The sanctions imposed on Rusal will take away over 6 % of global supply, and 14 % outside China, as per media reports.

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Posted By : Rabi Wangkhem on Wed, 25 Apr 2018
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