Why Hindalco is unfazed by Trump’s 25% aluminium tariff

Hindalco focuses on domestic market, while its US subsidiary Novelis can pass on higher costs to consumers, says MD Satish Pai

Updated15 Feb 2025, 12:21 AM IST

Satish Pai, managing director, Hindalco Industries.

Mumbai: The US’ upcoming 25% tariff on aluminium, announced by president Donald Trump, will have a mostly neutral impact on Hindalco Industries Ltd. and its American unit Novelis, according to managing director Satish Pai.

Novelis uses aluminium scrap as well as virgin aluminium as input, which it then processes into flat-rolled sheets to be used by industries ranging from beverage cans to aerospace. The company passes through the cost of aluminium to its consumers after adding its margins, Pai said.

“The metal price is a pass-through for Novelis. It gets paid a conversion premium to convert the metal into a flat sheet for can or auto,” Pai told Mint on Friday.

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Hindalco, India's second largest producer of the metal, focuses on aluminium sale in the local market and has little exposure to the US, shielding it from any adverse impact from the new tariff.

The US will be levying a tariff of 25% on all its steel and aluminium imports starting 12 March.

“This news has been out for a long time and LME continues at $2600 level. So I don’t think worldwide LME prices are going to get impacted much,” Pai said. LME refers to the London Metal Exchange, where aluminium cash price is hovering around $2,600 for a metric tonne.

Sticking to view

Pai stuck to his view that the new Trump administration in the US will be a positive for Novelis’ business. The company’s domestic manufacturing plans in the US align with Trump’s push for more manufacturing in the country, he said.

The company has put on the back burner its plans to list Novelis in the US at least for the next one year, Pai said.

Looking ahead, Pai said that the company’s financial performance in the fourth fiscal quarter will be a sequential improvement on the third quarter. This is because he expects Hindalco’s record performance run to continue due to elevated aluminium prices, while performance of Novelis will also improve from its lows in the third quarter. Novelis suffered from high aluminium scrap prices in the third quarter, which squeezed its margins.

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“India business should have a good Q4 as well,” Pai said. “So, FY25 will be good and if the LME prices continue -- which we think will hold -- FY26 should also be a good year for the India business.”

During the quarter ended 31 December, Hindalco’s upstream aluminium business, which produces aluminium metal, reported a record Ebitda of ₹4,222 crore, which was three-fourths more than the same period last year. It’s aluminium downstream business, which sells value-added aluminium, reported an Ebitda of ₹150 crore, which was about 39% higher year-on-year.

Novelis Q3 Ebitda shrank 18% year-on-year to ₹3,097 crore.

In India, Hindalco is investing in captive coal mines to reduce its exposure to market fluctuations in coal prices. About a tenth of its coal requirement is met from captive mines, Pai said, a number which he expects to go up to 90-100% by 2028 as the company operationalizes its new mines Jharkhand and Odisha.

Why Hindalco is unfazed by Trump’s 25% aluminium tariff

Hindalco focuses on domestic market, while its US subsidiary Novelis can pass on higher costs to consumers, says MD Satish Pai

Also read | Base metal miners likely to outshine steel companies in a mixed Q3

Sticking to view

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