ALUMINIUMBy -

G. VINAY KUMAR ,

MBA –A.

1. Vision & Mission

2. Aditya birla group industry overview

3. ECONOMICS DEFINATION

4. About the company (HINDALCO)

5. About the product – Aluminium

6. Production analysis

7. Cost analysis

8. Elasticity of product Aluminium

9. Economic concepts

10. Factors influencing supply of Aluminium

11. Factors determining Demand

12. Market structure

13. Demand forecasting

14. Cost structure

15. Cost management techniques

Topics

Group Vision:

To be a premium global conglomerate with a clear focus on each business.

Group Mission:

To deliver superior value to our customers, shareholders , employees and

society at large

Vision & mission

* The group was founded by Seth Shiv Narayan Birla in 1857.

* The group interests in sectors such as viscose staple fibre, metals,

cement (largest in India), branded apparel, carbon black, chemicals,

fertilisers, insulators, financial services, telecom (third largest in

India), BPO and IT services.

* Total revenue of approximately US$45 billion in year 2014

The Aditya Birla Group is an Indian multinational conglomerate

named after Aditya Vikram Birla, headquartered in the Aditya Birla

Centre in Worli, Mumbai, India. It operates in 40 countries with

more than 120,000 employees worldwide.

Aditya birla group industry overview

Aditya birla group industry overview

* The Group's non-ferrous metals are under Hindalco Industries.

* Its manufacturing locations are primarily in India and it owns

mines in Australia. On 11th February 2007, the company entered

into an agreement to acquire the Canadian company Novelis for

U$6 billion.

* It is the third largest Indian private sector conglomerate behind

Tata Group with revenue of just over USD 100 Billion and RIL

with revenue of USD 74 Billion.

Humans have unlimited wants and means for satisfying these

wants are scarce. The society with fixed resources , skills , and

productive capacity deciding what specific kinds of goods it

ought to produce and how they ought to distributed .

Economics is nothing but allocation of scarce means(resources)

to get on to un limited ends(wants) which have alternative uses.

Resources are from Australia and workmen physical labour

from allover the world 136000 labour’s and 66stores were

opened for achieving the end product with those scarce

resources.

ECONOMICS DEFINATION

Integrated primary producer of aluminium

Hindalco makes alumina chemicals, primary aluminum, rolled

products, alloy wheels, roofing sheets, wire rods, cast copper rods,

copper cathodes and several other products.

An Aditya Birla Group flagship company,Hindalco has its

aluminium plant at Renukoot in UttarPradesh.

Hindalco Industries is the world's largest aluminium rolling

company, aluminium extrusions, rolled products,wheels and foils.

It was held to be 5th largest in metal.

It has 39% shareholding in Hindalco Co Ltd.

About the company (HINDALCO)

Aluminium products

Aluminium is abundantly present in the earth’s crust. The ore of

the metal i.e. bauxite generally occurs in the tropical and sub

tropical areas of earth and is present in almost all continents

except Antarctica with the estimated deposits of 65 billion tons.

Production of aluminium from bauxite ore requires three stages

i.e,.

mining of the ore,

refining of the ore to produce alumina and,

finally smelting of alumina into aluminium. To obtain 1 ton of

metal, 2 tons of alumina is required and for producing 1 ton of

alumina, 2-3 tons of bauxite is required.

About the product – Aluminium

HINDALCO represent the private sector of the country

Hindalco Flat Rolled Products :

Hindalco enjoys a dominant market share as one of the leading aluminium

sheet manufacturers. Hindalco's rolled products find applications in various

industries such as packaging, transportation, building and construction,

electrical, defence and for general engineering applications.

Hindalco Aluminium Extrusion :

Hindalco, a leading aluminium extrusion manufacturer in India,

manufactures a wide range of alloys, including hard and special alloys.

Hindalco has two plants for aluminium extrusions in India - at Renukoot in

Uttar Pradesh and Alupuram in Kerala. The two plants possess well-

established manufacturing processes and QA system

Products

Production Process

It is an organised activity of transforming resources into finished products in

form of goods and services and the objective of production is to satisfy the

demand of such transformed resources .

Production is used for an activity of making something material.

The production of aluminium started in India in 1938.

India lies at the eighth position in the list of leading primary aluminium

producers in the world.

Taking of Raw material and transforming them by utility.

Factors of production :

1. Land

2. Labour

3. Capital

4. Entreprenear

Production

India is world's fifth largest aluminium producer with an aluminium production

competence of around 2.7 million tones, accounting almost 5% of the total

aluminium production in the world. India is also a huge reservoir of Bauxite with a

Bauxite reserve of 3 billion tones.

Hindustan Aluminum Corporation (Hindalco) was set up in UP in the year 1959. It

had a capacity of producing 20,000 ton per annum. In 1965.

Hindalco manufactures intermediate products required for our own production such

as power and carbon anode. Our Indian aluminium operations are located in 10

states and one union territory in India, with three refineries and two smelters that are

capable of producing over 600 ktpa of aluminium.

it took almost 46 years to make its production commercially viable. The research

work of several years resulted in extracting the aluminium from the ore. Aluminium

is third most available element in the earth constituting almost 7.3% by mass.

Currently it is also the second most used metal in the world after steel.

Production

Its refers to the study of behaviour of cost in relation to one or more production ,

criteria namely ,size of output ,scale of operations ,prices of factors of

production and other relevant economic variables. production relations as

against physical aspects which were considered in production analysis.

Opportunity Cost—the highest valued alternative that must be sacrificed to

attain something or satisfy a want.does not depend on who might use the

resource but is the resource’s highest value in any of the alternative uses not

chosen

Cost Classification

Opportunity costs

Fixed, Variable, and Marginal costs

Average total, fixed, and variable costs

Marginal costs

Cost Curves

Cost analysis

Fixed or variable

Cash or non-cash

Accounting expense or not

Opportunity costs

Outlay costs : involves actual expenditure of funds on , say , wages ,

materials , rent, interest.

Accounting costs : costs take care of all the payments and charges made

by the entrepreneur to suppliers of various productive factors.

Economic costs: normal return on money capital invested by

entrepreneur himself in his own business .

Cost analysis

cost

Typical Total Cost Curves

TVC

TC

TFC

Output

Average and MarginalCost Curves

Output

costMC ATC

AVC

AFC

Long run average cost curves

SRAC

SRAC

SRAC

AC

OUTPUT

Elasticity of product Aluminium

* Aluminium is a silver to white colored, Highly Elastic product.

* More or less capital intensive

* The Elasticity is greater than 1 i.e., when % change in quantity

demanded is greater than the %change in price

* Ductile element having atomic number 13 in the periodic table. It is a

light metal with only 1/3rd density as compared to that of steel.

* It is as good a conductor of heat and electricity as the metal copper is.

Aluminium is known for its feature of being resistant to outside weather,

atmospheric gases and liquids.

* Aluminium’s abundance in the earth’s crust stands third among other

elements. But it is not found in the free state anywhere in the world but

in combined form with other materials in the ore form.

Scarcity—there exist only a finite amount of resources—human and non-human. Nature does not freely provide as much of everything as people want.

Resources—(or )Factors of Production

Are Scarce

Inputs used in the production of goods and services

Land — Original fertility and mineral deposits, topography, climate, water, and vegetation

Labour — Contributions of humans who work (thinking and doing)

Capital — All manufactured resources including buildings, equipment, machines, and improvements to land.

Entrepreneurship—human activity of raising capital, organizing, managing, assembling other factors of production, and making basic business policy decisions.

Economic concepts

we implicitly understand scarcity , whether we are aware of it or not. It is

the most basic concept in economics, and is more of a solid fact than any

abstraction. Simply put, the world has limited means to meet unlimited

wants, so there is always a choice to be made.

social science studying how individuals make choices about the use of

resources in order to satisfy needs. Scarcity requires Choice. Economics is

the study of how we make those choices.

use models or theories (simplified representations (abstraction) of the real

world used to make predictions or to better understand the world)

models are based on assumptions—must decide on the usefulness of the

model.

ECONOMIC CONCEPTS

microeconomics—study of the economic behaviour of households and

firms and how prices of goods and services are determined

macroeconomics—is the study of economy wide phenomena resulting

from group decision making in entire markets. Deals with economy as a

whole.

Positive versus Normative Economics

Positive—purely descriptive statements or scientific predictions (e.g., if A

then B)

Normative—value judgements about economic policies; relates to

whether things are good or bad. What ought to be.

individuals respond to changes in relative prices, not absolute prices,

therefore, changes in the general price level must be purged from the

analysis.

Economic concepts

Production Possibilities Curve—a curve representing all possible

combinations of total output that could be produced assuming (a) a fixed

amount of productive resources and (b) the efficient use of those

resources

Assumptions:

referring to output possible over a specified time period

resources are fixed over the time period

no significant changes in labour or productivity

Curve is bowed outward because of law of increasing relative cost the

opportunity cost of additional units of a good generally increases as

society attempts to produce more of that good

Economic concepts

Domestic demand and supply

International prices

Interference of government and various associations

Import duties

Other economic activities in the world

Price fluctuations of the input materials like power, freight etc

Economic factors influencing Market

Key Factors Affecting Supply and Demand :

Following factors have affected the supply of aluminum rolled products:

Production Capacity: As in most manufacturing industries with high fixed costs, production capacity has the largest impact on supply in the aluminum rolled products industry. In the aluminum rolled products industry, the addition of production capacity requires large capital investments and significant plant construction or expansion, and typically requires long lead-time equipment orders.

Alternative Technology: Advances in technological capabilities allow aluminum rolled products producers to better align product portfolio and supply with industry demand. As an example, continuous casting offers the ability to increase capacity in smaller increments than is possible with hot mill additions. This enables production capacity to better adjust to small year-over-year increases in demand. However, the continuous casting process results in the production of a more limited range of products.

Factors influencing supply of Aluminium

Trade: Some trade flows do occur between regions despite shipping costs,

import duties and the need for localized customer support. Higher value-added,

specialty products such as lithographic sheet and some foils are more likely to

be traded internationally, especially if demand in certain markets exceeds local

supply. With respect to less technically demanding applications, emerging

markets with low cost inputs may export commodity aluminum rolled products

to larger, more mature markets. Accordingly, regional changes in supply, such as

plant expansions, may have some effect on the worldwide supply of commodity

aluminum rolled products.

The production of aluminium requires alumina and uninterrupted supply of

electricity. Compared with the production of metals, aluminium’s requirements

are fairly straight forward. However, in recent years there have been a host of

issues which have affected supply. Most of these have been to do with

electricity.

Factors influencing supply of Aluminium

Economic Growth: We believe that economic growth is currently the single

largest driver of aluminum rolled products demand. In mature markets, growth in

demand has typically correlated closely with growth in industrial production. In

emerging markets such as China, growth in demand typically exceeds industrial

production growth largely because of expanding infrastructures, capital

investments and rising incomes that often accompany economic growth in these

markets.

Substitution Trends: Manufacturers’ willingness to substitute other materials for

aluminum in their products and competition from substitution materials suppliers

also affect demand. For example, in North America, competition from PET plastic

containers and glass bottles, and changes in marketing channels and consumer

preferences in beverage containers, have, in recent years, reduced the growth rate

of aluminum can sheet in North America from the high rates experienced in the

1970s and 1980s.

Factors influencing supply of Aluminium

Threat of Substitutes:

Copper can replace aluminium in electrical applications; magnesium, titanium,

and steel can substitute for aluminium in structural and ground transportation uses.

Composites, steel, and wood can substitute for aluminium in construction . Glass,

paper, plastics, and steel can substitute for aluminium in packaging.

Threat of imports:

The decline in duty protection has resulted in a narrowing differential between

landed and domestic costs, and increased imports.The reduction in customs duties

on non-ferrous metals would keep a check on a rise in prices, as landed cost of

these would effectively reduce, thus reducing the net difference between landed

and domestic costs.

Factors determining Demand

income

Price of commodity

tastes and preferences,

the price of related goods,

changes in expectations of future relative prices,

population (i.e., market size).

importance of the commodity in the consumers budget—the greater the

percentage of a total budget spent on the commodity, the greater the

person’s price elasticity of demand for that commodity.

Factors determining Demand

* Few sellers are selling homogeneous or differentiated products.

* Restricted entry and exit to others .

* Restricted access to technology.

Market structure

Forecasting is essential for sound functioning of a firm.

Hindalco is on track for impressive volume growth in its domestic

alumina/aluminum production volumes which provide it with amongst the

highest operating leverage globally. The ramp up at the newly commissioned

facilities has been better than our expectations. Consequently, we raise our

domestic aluminium production forecasts by 12%/11% for FY15/16 and

alumina production forecast by 5% for FY16.

A combination of higher volumes, premiums and operating cost efficiencies

should drive 5%/7% increase in our consolidated EBITDA (earnings before

interest taxes depreciation and amortisation) forecasts for FY15/16. However,

impact on net profit will be tempered by higher depreciation and interest

charges associated with the commissioning.

Demand forecasting

Aditya smelter will have a world beating cost structure once it gets on stream in

totality and , with Mahan , is expected to enhance Hindalco’s cost competitiveness

significantly , making it one of the most efficient primary aluminium company

Globally.

Short run and long run

Short run in which one factor of production is fixed that do not vary with output.

( Total costs= Total variable + Total fixed)

Long run : All are variable and can change with production without any fixed

factors all are variable factors.

(Average total cost = average fixed cost + average variable cost)

Cost structure

Those cost management processes required to ensure that the project is

completed within the approved budget

Processes:

1. Resource Planning

2. Cost Estimation

3. Cost Budgeting

4. Cost Control

Cost management techniques

Understanding Costs

Analyse your company's performance, and we will find that our business

costs fall into three categories: materials and labour (also called cost of

goods sold), and overhead. Each of these categories has its own

opportunity for cost control, and the impact of changes in one area must

be considered on the other two. Reducing your sales force may save costs

in overhead, for example, though if that reduces product sales, then our

material and labour levels are thrown out of balance.

Cost management techniques

Labour Savings

Direct labour is frequently the single greatest expense in the

manufacturing sector. In some regards, it is the most difficult

expense to change, because the consequences of change

affect people, and their response to change may be

unpredictable. Analyse production regularly for redundant

tasks, and adjust your work force accordingly, but never lose

sight of the motivational changes that may occur

coincidentally.

Cost management techniques

Purchasing Savings

Raw materials provide a variety of ways to reduce and control

costs. Watch our suppliers and search for alternate sources for the

same quality stock at better prices. Keep annual contract terms with

suppliers to allow for changes in market conditions, unless we have

a very compelling offer over several years. Investigate payment

terms with our suppliers to match the rate of inventory turnover to

reduce our working capital needs, reducing costs on money we may

borrow.

Cost management techniques

Inventory Management

Consider the time raw material sits waiting for use. Warehouse space can be freed or eliminated through just-in-time delivery practices, where stock arrives from the supplier and moves directly to the plant floor. Analyse our situation for similar changes

Take It Off The Top

Overhead expenses are often described as "the cost of doing business" and may be perceived as static. However, a dollar saved on overhead goes straight to the bottom line. Outsource payroll or marketing functions such as direct mail. Routinely review the bills for things such as office supplies, office and cell phones and cleaning services, and be aggressive about finding better deals.

Cost management techniques

Working The Programs

Lean manufacturing philosophies such as, 5-S and other best-

practices programs encompass cost controls in all areas as essential

to efficient operation of a manufacturing business. These techniques

address corporate culture from the ground up. While there are cost-

control benefits, formally instituting a program of this type has

costs of its own, so weigh the pros and cons of what such a program

has to offer your small business.

Cost management techniques

THANK YOU