Nalco seeks to set up $2.6b Iran alu­minium com­plex

The Pak Banker - - COMPANIES/BOSS -

In­dia's Na­tional Alu­minium Co Ltd (NALCO) wants to set up an alu­minium smelter and an as­so­ci­ated power plant in Iran worth as much as $2.6 bil­lion, its boss said, once sanc­tions against the coun­try start to be lifted.

Ta­pan Ku­mar Chand will meet with In­dia's for­eign min­istry of­fi­cials and the am­bas­sador of Iran in New Delhi next week to take things for­ward, he said in his first in­ter­view since be­ing ap­pointed as the chair­man-cum-man­ag­ing di­rec­tor of Nalco last week.

Chand said he would pre­fer a lo­cal part­ner who could sup­ply cheap power to run a 1 mil­lion tonne per an­num smelter in Iran. Nalco would source alu­mina as raw ma­te­rial for the plant from its re­fin­ery in the eastern In­dian state of Odisha.Nalco's plans pro­vide fur­ther ev­i­dence of how busi­ness ties are in­creas­ing be­tween the two coun­tries.

KIOCL, another In­dian state-backed com­pany, last month agreed to sell high­grade iron ore pel­lets to Iran in a deal po­ten­tially worth $200 mil­lion an­nu­ally.

In­dia and Iran had main­tained a close re­la­tion­ship de­spite the US-led trade re­stric­tions over Iran's nu­clear pro­gramme. Last month, Iran and six world pow­ers reached a nu­clear deal, clear­ing the way for an eas­ing of sanc­tions on Tehran. Chand said multi-year­low prices for alu­minium due to an over­sup­ply would not be a de­ter­rent to the plans. Any new plant would take 2-3 years to com­plete and by then de­mand could im­prove given the na­ture of such cycli­cal in­dus­tries, he said.

"Gen­er­ally pro­duc­ers take the op­por­tu­nity of such down­turns to build up their plant ca­pac­i­ties, so that as and when de­mand picks up they are in a po­si­tion to cater to that," Chand said.

A con­sul­tant ap­pointed by Nalco has also short­listed Oman and In­done­sia as des­ti­na­tions where it could set up a smelter. Noth­ing has been fi­nalised, Chand said.

In­dia's per-capita con­sump­tion of alu­minium is just about 2.2 kg, com­pared with 25 kg in China, ac­cord­ing to in­dus­try data in In­dia. But de­mand in the coun­try is grow­ing at an an­nual rate of about 11 per­cent against global growth of 6%.

Chand ex­pects Prime Min­is­ter Naren­dra Modi's plans to ex­pand power trans­mis­sion net­works, build new cities and ex­tend the coun­try's rail­way net­work to drive de­mand growth.

In­dian alu­minium pro­duc­ers, in­clud­ing Nalco, Vedanta Ltd, and Hin­dalco In­dus­tries Ltd, have the ca­pac­ity to pro­duce 2.9 mil­lion tonnes of alu­minium a year. Chand said In­dia's alu­minium out­put was about 2 mil­lion tonnes last fis­cal year and could rise to 2.42.5 mil­lion tonnes in the cur­rent year.

Alu­minium prices are cur­rently un­der pres­sure from a sup­ply glut. Bench­mark alu­minium on the Lon­don Me­tal Ex­change, for ex­am­ple, is near its low­est for six years.

Nalco, which also wants to di­ver­sify into nu­clear power pro­duc­tion, is nev­er­the­less look­ing to strengthen its raw ma­te­rial sup­ply chain.

It ex­pects Odisha to give it a green light for a new baux­ite mine in the next few months that will help it to start work on another 1 mil­lion tonne per an­num alu­mina plant at a cost of about $867 mil­lion.

The com­pany, which has the ca­pac­ity to pro­duce 2.28 mil­lion tonnes a year of alu­mina from nat­u­rally oc­cur­ring baux­ite, is also in talks with of­fi­cials in Modi's home state of Gu­jarat to set up another 1 mil­lion tonne a year alu­mina re­fin­ery there, Chand said. "You can't re­main at the same place," he said. "If you don't grow, com­peti­tors will start grow­ing and you will be squeezed out of the mar­ket."

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