National Aluminium Company (Nalco) is on the government?s disinvestment radar, with the Union cabinet recently approving the proposal for a 12.5% stake sale in the aluminium major. The PSU, which is credited with having Asia?s largest integrated aluminium operations, has also diversified into power generation. Ansuman Das, who has recently taken over as Nalco?s chairman-cum-managing director, discusses his company?s business plans with FE?s Dilip Bisoi. Excerpts:
What is the global aluminium scenario?
After a sharp slowdown, the global demand for aluminium started growing in 2011, albeit at a slow rate. The short-term bounce-back in demand and an improvement in global liquidity indicators helped aluminium prices to remain elevated until early 2011. The growth rate slowed down as the year passed and has reduced to 3 to 4%. Apart from China and India, which continued their consumption growth pattern, countries like the USA, Japan, Russia, Brazil and a few of the European countries witnessed some rise in consumption. However, fears of uncertainty in global demand, owing to the European debt crisis, impacted the rising trend in global base metal prices. Since then global base metal prices have continued to soften and remained subdued.
How do you position Nalco in the global aluminium industry?
Over the past decade, the aluminium industry in India has rapidly expanded its base and the country?s domestic consumption of the metal has more than doubled at a CAGR of 11% between FY02 and FY11. Nalco?s high quality bauxite ore establishes it as one of the low-cost producer of primary aluminium in the globe. Due to this competitive cost advantage, the company could complete two phases of expansion with an investment of more than Rs 7,500 crore. With such consolidation, the company has plans to venture into new areas.
Most offshore projects of Nalco are not moving in a desired way. What would be your strategies regarding these projects?
Due to availability of good quality coal at an economic price, Nalco was trying to set up a smelter and a captive power plant in Indonesia. After conducting due diligence, Nalco identified a coal mining company to source coal on a long-term basis. However, the project has got delayed, mainly because the coal company has not been able to achieve financial closure for its project. It is also undergoing ownership restructuring. In view of these uncertainties, Nalco has been constrained to put the project on hold. We are keeping a close watch on the developments to decide our next course of action.
The Sundargarh project has got clearance from the state. When would it be launched?
We are expecting an early formal communication from the government of Odisha in this regard. Following the state government?s clearance for provision of water, we shall be qualified to apply for a coal block, which shall be allotted by the central government. This is perhaps our most ambitious greenfield project.
Do you propose to set up a greenfield alumina refinery in Orissa after getting the Pottangi bauxite mines?
No, because Pottangi is in the vicinity of Damanjodi, where our alumina refinery is located, the bauxite mining out there shall cater to the enhanced capacity of the present set-up. In fact, the fifth stream of the alumina refinery in Damanjodi and the Sundargarh project are envisaged keeping Pottangi bauxite deposits in mind.
How you are planning to finance the new projects?
From our own resources, to start with. We will resort to external financing as and when required.
Mining linkages?both bauxite and coal?are critical for Nalco to become a global player. How you are going to work it out?
We have the Panchpattmalli bauxite deposits with us and are confident of getting a lease for the Pottangi deposits soon. With this we have enough bauxite to feed the requirements of the proposed smelter and power complex in Sundargarh. For the proposed Gujarat refinery, we are entering into long-term Bauxite supply agreement with the GMDC. Yes, coal is a matter of concern. We are developing the Utkal-E coal mine block and it should be operational around mid-2013.
However, there are various issues to be resolved. Forest clearance, land acquisition and coal evacuation methodology are issues which, we hope, shall be resolved soon. We also plan to apply for coal blocks to feed the proposed power plant in Sundargarh and the expansion programme in CPP.
Nalco?s operations at Damanjodi and Angul have been badly hit by coal shortages. What is your strategy to overcome this problem?
I agree that our operations in Angul and Damanjodi have been badly hit by the coal shortages. Such situation was perhaps not unique to Nalco. Of late, coal mining & transportation has not been up to the desired and targeted levels. Problems of clearances and land acquisition are what MCL (Mahanadi Coalfields Ltd) is also facing. We are in constant touch with MCL and railway authorities, and jointly trying to overcome the crisis. We are also augmenting our coal handling & storage facilities and optimising receipt of e-auction and imported coal to meet the shortfall.
Has Nalco?s balance-sheet hit by the global market downturn?
Yes, the company?s balance sheet has been hit by the market downturn. The sale price of a metal is directly linked to the LME price for exports and the domestic price is also fixed on the basis of price parity vis-?-vis imports. While there is a downturn in the LME price, our input costs are rising, mainly due to increases in the prices of coal and fuel oil.
What is your strategy to withstand the slowdown?
Given Nalco?s portfolio, there isn?t much to do except to control costs. Moreover, business diversification holds the key to overcome such periodic slowdown. That is why we have forayed into the energy sector and are eying backward integration through coal blocks and joint ventures for other input materials.
