India’s Nalco Registers Lower Production on Coal Shortages

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Riding on the back of Stuart’s aluminum production story last week, India‘s state-owned National Aluminium Co. (Nalco) announced that aluminum output dropped in 2011-12 to 413,000 metric tons against 444,000 metric tons in the previous financial year, according to a Business Line report.

The company cited lower coal supply as the main reason for the lower output, namely that supplies from Mahanadi Coalfields affected primary metal production.

The newspaper quoted B.L. Bagra, CMD at Nalco, as saying that power generation and consequently metal production were down owing to lower than contractually linked supply of coal, forcing them to shut down 10 percent of their smelting capacity.

Mahanadi is mandated to supply Nalco with 4.8 million metric tons of coking coal per year. “Till the end of December last year, the coal supply backlog was significant forcing us to depend more on import. But in the January-March quarter, Mahanadi stepped up supplies bringing down the annual shortage to 400,000 tonnes,” Bagra was quoted as saying.

An official statement issued by Nalco says that the company has achieved the highest-ever bauxite production of 5 million tons, against the previous best of 4.88 million tons achieved in 2009-10. Besides, Nalco’s alumina refinery has produced 1.69 million tonnes of alumina hydrate, which is an all-time high, against the previous best of 1.59 million tons achieved in 2009-10.

Bagra said in the statement that besides coal shortages, the dwindling LME prices of the metal forced the company to cut down its aluminum production to some extent.

“It was not commercially viable to produce more metal using expensive imported coal,” Bagra said. “However, the Smelter has achieved a capacity utilization of 90% since remaining of pots are under shut down since September 2011, due to coal constraint, ” Bagra said in the statement.

The net power generation by the company’s Captive Power Plant was 6,200 million units.

On the sales front, during the fiscal year, Nalco has recorded 415,916 metric tons of cast metal sales, against 438,952 tons the previous year. Moreover, during the year, the company achieved alumina hydrate sales of 842,396 tons, against 681,917 tons in 2010-11. The company’s aluminum exports stood at 98,399 tons this year, against 98,200 tons achieved in the last financial year, according to a company statement.

The forecast for 2012 global production of aluminum is 42–45 million tons, driven by rising Chinese output. The global aluminum industry is passing through tough times, however. During recent years, aluminum has gained producers less profit compared to other metals, mainly copper.

Stuart’s recent MetalMiner article — “I Don’t Like Aluminum” — points out the downturn in the profitability of global aluminum companies. The article states that the operating profit margin for a marginal aluminum producer has been 14 percent over the past decade, compared with 43 percent for copper.

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