Aluminium producers likely to see pressure on profits, says NALCO chief

Demand for aluminum to remain strong, driven by automobiles, construction and power sectors, says Tapan Kumar Chand.

Falling global prices of alumina and aluminium are likely to put pressure on Indian producers of primary aluminium, which have achieved nearly full capacity utilisation.

This was stated by Tapan Kumar Chand, chairman and managing director, National Aluminium Corporation (Nalco). While addressing shareholders at the company’s annual general meeting, he noted that domestic prices were linked to those on the London Metal Exchange (LME). 

In last year’s September quarter, the LME’s average price of aluminium was $2,054 a tonne, about 14 per cent more than the present one of $1,768 a tonne (in the June quarter, it was 21 per cent less in India). 

The expected range in this financial year is $1,750-1,800 a tonne. Since the US-China trade war began, all metal prices have been falling on fear of global economic slowdown. 

Chand added: “The threat of increasing aluminium import, which accounted for 58.9 per cent of total consumption in 2018-19, persists. Support from the government in countering this will help domestic producers to safeguard their market share and profitability.” 

He believes demand for aluminium will remain strong, driven by the usual high consuming sectors like automobiles, construction and power. Hence, despite pressure on its prices, Nalco has decided to go ahead on its investment plans.

The central government-owned entity is adding a million tonnes per annum (mtpa) to its existing installed capacity of 2.275 mtpa, at a cost of Rs 5,540 crore in its alumina refinery. The project is likely to be completed by 2022-23.

Sourcing of bauxite for this expansion is to come from the Pottangi mines in Odisha’s Koraput district. It has 75 mt of reserve and was reserved for Nalco by the central government, with mining scheduled from mid-2022. Bauxite is also planned from the south block of its existing Panchpatmali mines in the same district, for which capital expenditure of Rs 483 crore has been projected, its annual report stated.

To cater for electric vehicles, Nalco is venturing into production of lithium-ion batteries. The company has been shortlisted by Indian Space Research Organsiation for transfer of the technology, an agreement having been signed this April. The process of technology transfer and training has started, said Chand.