brief

1. ALUMINIUM
By -
G. VINAY KUMAR ,
MBA –A.

2. Topics
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

3. 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

4. Aditya birla group industry overview
* 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.

5. 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.

6. ECONOMICS DEFINATION
 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.

7. About the company (HINDALCO)
 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.

8. Aluminium products

9. About the product – Aluminium
 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.

10. Products
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

11. Production Process

12.  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

13. 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.

14.  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

15. 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 .

16. cost
Typical Total Cost Curves
TVC
TC
TFC
Output

17. Average and Marginal
Cost Curves
Output
cost
MC ATC
AVC
AFC

18. Long run average cost curves
SRAC
SRAC
SRAC
AC
OUTPUT

19. 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.

20. Economic concepts
 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.

21.  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

22. 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.

23. 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

24. Economic factors influencing Market
 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

25. Factors influencing supply of
Aluminium
 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.

26. 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.

27. 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.

28. Factors determining Demand
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.

29. 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.

30. Market structure
* Few sellers are selling homogeneous or differentiated products.
* Restricted entry and exit to others .
* Restricted access to technology.

31. Demand forecasting
 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.

32. Cost structure
 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)

33. Cost management techniques
 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

34. 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.

35. 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.

36. 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.

37. 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.

38. 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.

39. THANK YOU