The copper part shut down for a month to month-and-a-half, and some of the smaller downstream. But bigger smelters, refineries, power plants ran all through the lockdown.

Demand has started to pick up in India; till it recovers at home, Hindalco Industries will continue to export heavily to prevent inventory build-up. Satish Pai, managing director, Hindalco Industries, spoke to Shubhra Tandon on business in times of Covid-19 and updates on Aleris. Edited excerpts:

At what capacity levels are your plants operating currently versus the March-April period?
Post the lockdown, Novelis is now back up to more than 90%, and Hindalco at about 99%. Novelis had to shut two plants in April and May; Hindalco throughout the lockdown ran at about 80% capacity. The copper part shut down for a month to month-and-a-half, and some of the smaller downstream. But bigger smelters, refineries, power plants ran all through the lockdown.

What is the outlook on demand revival across key markets, also value-added products?
For Novelis, 60% of it is cans, and cans were in strong demand throughout the lockdown because people consumed beverages even at home. What they got impacted by was auto plants shutting down. Those have re-opened and auto demand has started to come back. China is already back to pre-Covid levels. The US is now back and Europe will be next. Indian demand has just started to pick up in June. So right now we are heavily exporting both aluminium and copper from whatever we produce. In April, in aluminium, we exported 90%, in May it was 80%, in June it would probably be 70-75% as the domestic market slowly starts to pick up. Though factories in India are opening up, customers are having issues on getting labour. So, it will take a few months to sort all this back.

What are the realisations in the export market? How does it compare with the domestic market?
We prefer to sell domestically but I think that the last thing we want to do is to build up inventory, so we will export till the domestic market picks up.

Commodity prices have begun to rise. What is your assessment of raw material prices going forward?
They both go hand in hand. For us, 40% of our cost is power which is based on coal and in India right now the government has taken so many proactive steps to have enough coal available at reasonable prices, so I think that is going to benefit us.

What is the outlook on aluminium and copper prices?
Copper prices do not impact us as we are in the converter business, in aluminium in India we are impacted, we are currently running at $1,590-1,600 LME, I think it is going to be range-bound between $1,500 and $1,700.

Analysts believe that having sold the Lewisport and Duffles plants makes the Aleris deal less lucrative. Please comment.
We did Aleris for three reasons. The first one was to get aerospace, which we get. The second one was to do a backward integration in China, as they have a brand new plant there, so we could link it to our auto facility in Changzou, which we get. And the third part was to get more diversification of auto clients by getting Lewisport. So we get two out of three and I don’t think that is too bad.

Since auto was an important focus area when the deal was announced, with the two plants gone, what will be the company’s strategy?
We have enough capacity, because right now there is worry over what the auto demand will be. We recently did 100KT extension for auto in China, we were doing 200KT expansion in Guthrie, Kentucky.

What is the outlook on aerospace demand, as it has been directly impacted by the pandemic?
We have got into aerospace as a longer-term bet. So, I think in the shorter term there is no doubt it has been hit. But things are going to normalise back.

Cans and speciality have become almost equal in the product mix. How will the product mix change in the next couple of years?
As China and Guthrie come up, auto will go up a bit more. But can demand is also very strong. Normally we reduce specialities and add to the can production, but now we have got Aleris coming in, which has got a lot of speciality as well. Aleris will integrate in the next few quarters, so we will see how the overall mix will look. But I think can is certainly going to be one strong sector, more than 50-60%, and then auto is going to be 20%, and then aerospace comes in, though very small, and then we have the industrials, which are the specialities. So we will be quite a well-diversified group.