Bullish on growth prospects, Nalco lines up Rs.30,000 cr

Source: PTI 

Upbeat about a rise in aluminium consumption in India, Navaratna PSU Nalco is all set to invest Rs.30,000 crore in various projects in the next five years.

“Nalco plans to invest to the tune of Rs.30,000 crore in the next five years,” Nalco’s CMD Tapan Kumar Chand said in his Republic Day message, adding that a Rs.6,000-crore refinery project in Damanjodi is on the anvil too.

“Sunny days are ahead for aluminium industries as consumption in the country is slowly picking up against the backdrop of an increase in GDP to 7.5% this fiscal and availability of consumption potential of more than three multiples,” the CMD said.

Noting that the average consumption was 2.2 kg in India as against the global 8 kg per capita, Chand said growth in electrical and electronics sectors as well as construction, transport and automobiles are likely to spur more consumption.

Voicing concern over the sluggish world aluminium market, he said global aluminium production has exceeded consumption by 2.6%, leading to a surplus of roughly 1.4 million tonnes in 2015.

Slowdown in consumption in China has resulted in dumping, causing a steep fall in metal prices, the Nalco CMD said, adding at present aluminium prices are moving in a narrow band of around $1,500 per tonne, much below the cost of production of primary producers.

Seventy per cent of companies in the world have reported cash loss. Many smelters have been shut and many more are resorting to production cuts, he said.

Though consumption is rising 6% in India, increase in import has become “a matter of concern” as the volume exceeded 1.6 million tonnes in 2014-15 and is on the rise.

Aluminium imports constitute 56% of total domestic consumption of metal, leaving only 44% to domestic producers, Chand said.

By the end of third quarter, cumulative production in bauxite, the raw material for aluminium, has gone up to 45.74 lakh tonnes with a growth of 6.27% over the same period last year.

By the end of 2015-16, the production is likely to be at the level of 63 lakh tonnes, the CMD said.

Nalco registered a 39% growth in profit after tax in the second quarter as against the preceding one. But due to continuous downturn in the market, profitability during this financial year has remained depressed compared with the last year, he said.

A brownfield smelter project and a power plant are also in the pipeline.

Nalco plans to despatch a team to the Middle-East to study world-class aluminium upstream and downstream units there, Chand said.

Given tough market conditions, Nalco is developing a new corporate plan with a New Business Model (NBM) which would help the company stay afloat with profitability, he added.

NBM supports aluminium business by reducing cost with an increase in volume through modernisation, brownfield expansion and upstream and downstream integration.

The model envisages diversification into green and nuclear power, rare metal titanium, recovery of iron from red mud waste and merchant mining.

“We have already formed a JV with Gujarat Alkalies and Chemicals for a caustic soda plant at Dahej in Gujarat. We are also exploring the opportunity to set up a greenfield aluminium smelter abroad, where energy will be available at a competitive price,” Chand said.

“The company has started discussions with Iran, Oman, Qatar and Indonesia in this regard.”

January 27, 2016 | 04:55pm IST