The CEO of India’s Amara Raja Batteries said the firm is braced for further hikes in the price of lead into 2018— but that it has “mitigated” the impact through existing contracts.
S Vijayanad said while LME prices had seen “close to 25% growth” over the past year, the industrial and automotive battery maker expects to see lead prices “in the range of $2,400 to $2,500 per metric ton” by next spring.
“That poses certain cost input challenges for us, but the industry structure and our own business portfolio indicates that close to about two-thirds of that volume is backed up by price variation clauses in our contracts with customers,” Vijayanad said. “So there is a risk on that one-third volume, and thankfully, we have taken the pricing decisions that have helped us mitigate this risk.”
Vijayanad’s comments came as Amara Raja reported a 7% rise in turnover for the second quarter ended last September to around $214 million compared with the same period last year. Earnings before interest, taxes, depreciation and amortisation (EBITDA) for the quarter were up 3.5% (around $35m) compared to the year ago period.
Vijayanad, who was asked in a conference call with industry analysts about Amara Raja’s interest in branching into the lithium sector, said lithium was a “priority area”— and the company would be “making the right moves at the right time”.
However, Vijayanad said while some sectors would be “more conducive for lithium deployment”— such as telecoms— “lead-acid batteries will continue to be the preferred choice of energy backup in larger footprint installations like the telecom towers”.
“Lithium at the initial deployment cost is still three-to-four times costlier than lead acid,” Vijayanad said. “Depending on what application you’re looking for, there is sometimes justification to spend that money upfront.”
“Globally, I think electric vehicles have adapted lithium as probably the only feasible solution because lead-acid is too bulky… Lead-acid continues to have the economic advantage. Now add the salvage value of lead at the end of its life cycle, the net after total cost of ownership is significantly still tilted towards lead-acid.”
A recent report by the India Energy Storage Alliance said the country’s lead-acid business is set to soar over the next few years and demand from stationary and motive applications would more than double in value.