Deutsche maintains `Sell’ rating on NALCO

Deutsche maintains `Sell’ rating on NALCO

RESEARCH: DEUTSCHE BANK RATING: SELL CMP: RS 187
Deutsche maintains `Sell’ rating on Nalco with a price target of Rs 126. Nalco’s latest alumina sale tender, which is used as a benchmark for the spot market globally, has been closed at US$194/MT. The new contracted price is down 58% from a high of US$458/MT which Nalco got for a 30,000-tonne shipment in July ‘08. Outlook for alumina remains negative as brought out by the bidding range. Apart from the winning bid of US$194/MT, the majority of bids from traders ranged between US$153-US $176/MT, which provides an indication of market expectations of future alumina price movement. Nalco is averse to any production cuts despite the global demand weakness. Consequently, its aluminum inventory situation is expected to get worse. According to the news flow, inventory is hovering around 15 Kt which is already double of the normal levels of 8 Kt. The inventory situation is expected to get even worse with average inventory increasing to 30 Kt by the year-end . Deutsche remains negative on alumina /aluminium demand and pricing outlook in 2009.