NALCO cuts India Aluminium Prices by 2,500 rupees/T-source

Mar. 17,NEW YORK (Dow Jones) &mdash;Copper's price surge this year is sparking a switch among manufacturers to another electricity-conducting metal: aluminum.
Makers of automobiles, air conditioners and industrial components are increasingly turning to the much cheaper metal to help offset rising cost pressures as the global economic recovery gains steam.
The difference between the prices of copper and aluminum is now enough to cover the costs of retooling some manufacturing processes and pay for the extra aluminum it takes to conduct the same amount of electricity as copper.
&quot;There is a lot more engineering and development activity as these companies think about how to replace copper with aluminum,&quot; said Charles Belbin, spokesman for Atlanta-based aluminum producer Novelis Inc., a unit of India's Hindalco Industries Ltd.
Markets ripe for the switch include wiring for automobiles and buildings and evaporator and condensing coils used in commercial refrigerators.
&quot;There will be a new wave of relooking at products and seeing if there is a substitution available,&quot; said Joe Walton, owner of Williams Metals &amp; Welding Alloys Inc., a Wayne, Pa., processor and distributor of metals including copper and aluminum.
Such substitution has been on the rise over the past decade as demand from China and constrained mine supply have boosted copper prices. From February 2001 through last month, the metal had risen more than fivefold while aluminum gained 66%.
Although copper's recent record-setting rally to more than $4.60 a pound has been clipped by worries about Japan's nuclear crisis and fears that high oil prices will damp the global economic recovery, the metal remains well above the key $3.50-a-pound level where it often becomes more economical to use aluminum instead of the copper. Aluminum now costs around $1.15 a pound.
&quot;With copper being at historic levels, there has been global interest in going to aluminum cables in cars,&quot; said Chris Burns, North American engineering director with U.S. automotive parts supplier Delphi. &quot;You get a lot more bang for the buck.&quot;
On average, automobiles destined for developed markets contain about 20 to 23 pounds of copper, while more-basic models built in emerging markets have about 5 to 6 pounds. Within five years, if copper rises to the $5-to-$6 range, Burns predicts aluminum will replace 30% to 40% of the copper in automobiles.
Major aluminum maker Alcoa Inc. is trying to gain a bigger foothold in the auto market by developing new aluminum alloys and coatings to improve its performance in conducting electricity.
&quot;This is a very strong target area for us,&quot; said Mohammad Zaidi, Alcoa's head of research and development.
If copper prices keep rising, aluminum could end up being substituted for 20% of the global 19 million metric ton annual refined copper market, according to Alcoa estimates. At current copper prices, that figure is 4% to 5%, or about 800,000 fewer tons of copper being used. 
Annual copper substitution losses over the last five years have averaged 425,000 metric tons, or about 2% of the market, according to estimates by Anglo-Australian mining giant Rio Tinto PLC. The mining company expects losses to increase to around 3% of the market in 2010 and 2011.
The substitution may end up tempering copper prices somewhat. But most see prices generally trending higher as burgeoning demand from the recovering global economy is expected to outstrip mine supply, leaving industrial companies and their customers in the lurch until they can find substitutes.
St. Louis-based diversified industrial company Emerson Electric Co. has increased spending over the last year to reduce its use of costly inputs like copper.
&quot;We're definitely going through a major redesign effort on trying to figure out how to get certain materials out,&quot; Chief Executive David Farr said in a recent call with analysts. &quot;Given the fact that now we're seeing [the prices of] certain commodities, like copper, running at much higher levels, we're going to have to figure out how to use less copper.&quot;
For the construction industry, sales patterns at Graybar, a St. Louis-based distributor of electrical products, suggest that builders are likely to use more aluminum wiring during this summer's construction season than they have in recent years.
Graybar's sales of a type of copper wire commonly used in construction slipped 6% from the last half of 2009 to the same period last year, while sales of similar aluminum cable rose 6%, said Kent Duran, national product manager with Graybar.
&quot;It's reasonable to think that our aluminum building wire sales will go up a minimum of 10%&quot; this year over last, he said.
Condenser coils and heat exchangers in commercial refrigeration applications could also be ripe for substitution, said Talbot Gee, chief operating officer with trade organization Heating, Airconditioning &amp; Refrigeration Distributors International.
Commercial customers have been willing to spend more on large refrigeration units, so the units have been less sensitive to high copper prices. Now, the price of copper has been so high that even these units will probably see copper-to-aluminum substitution.
&quot;There's still more room for transition away from copper,&quot; Gee said.
The head of the world's largest private-sector copper producer, Freeport-McMoRan Copper &amp; Gold Inc., played down the threat of substitution, but acknowledged in a recent call with analysts that some customers are getting jittery.
&quot;They're concerned about high copper prices because of...the potential substitution, but offsetting that substitution is new markets,&quot; Chief Executive Richard Adkerson said.
He cited the potential copper demand from hybrid and electric cars, as well as increasing uses of electronics, where aluminum isn't as easily substituted because of space limitations. 
&nbsp;
 
&nbsp;