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Aluminium industry's margins to come down

The reduction in customs duty on aluminium will bring down domestic prices

The reduction in customs duty on aluminium from 25% to 15% is likely to affect the margins of the domestic aluminium producers.

The domestic prices of aluminium follows the global trend, but is higher than the international prices as it factors in the import duty.

Now that the import duty is reduced, the domestic prices will have to be brought down by the domestic aluminium majors, which will affect their margins.

Nevertheless, companies like Hindalco and Nalco are one of the lowest cost producers of aluminium in the world, and hence, though their margins will come down, they will not be adversely affected.

Companies like Hindalco, Nalco, Balco and Malco will find their margins shrinked on account of the above. The standalone secondary aluminium producers will be benefited. But considering the fact that there are hardly any profitable listed standalone secondary aluminium producers, the positive impact on stocks is marginal.

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