Nalco likely to hold back Iran smelter plans

Nalco has kept its options open to go for a toll-smelting arrangement with some Iranian firms

The National Aluminium Company (Nalco) is likely to keep in abeyance its plans to put up a greenfield smelter in Iran. Nalco had planned to establish a 0.5 million tonne per annum (mtpa) smelting facility in the West Asian nation, banking on cheaper natural gas supplies.

A senior Nalco executive said: Currently, the market conditions do not favour us to set up an aluminium smelter in Iran. A new overseas smelter needs substantial investment and we would evaluate all factors before going ahead with the plan. Nalco has domestic commitments as of now and we are going for a ramp-up of our existing smelting unit at Angul (Odisha).

In May, Nalco had entered into a memorandum of understanding (MoU) with Iranian Mines and Mining Industries Development Renovation Organisation to set up an aluminium smelter in Iran. The signing of the MoU coincided with Prime Minister Narendra Modi's visit to Iran. The smelter-cum-gas-based power plant was supposed to come up at the Chabahar free trade zone at an estimated cost of $2 billion.

Nalco's decision to hold back its proposed Iranian smelter project visibly stems from the Union mines ministry's direction to it. Mines minister Piyush Goyal has categorically asked Nalco to do a rethink on its overseas smelter plans and, instead, focus more on value addition in the country. The ministry has asked Nalco to draw up a roadmap to expand aluminium production capacity to 2 mtpa, up from 0.46 mtpa now. Nalco had set a target to reach its full rated capacity (of 0.46 mtpa) in the next financial year.

Nalco has, however, kept its options open to go for a toll-smelting arrangement with some Iranian companies. Under this proposal, Nalco will divert a portion of its surplus exportable alumina to the Iranian smelters for conversion to aluminium. Each year, Nalco exports around one mt of surplus alumina. This looked a profitable deal for Nalco since realisations from aluminium sale were up to five times higher than alumina. Initially, the toll-smelting arrangement was seen as a precursor to Nalco's larger plans to set up a full-fledged smelter in Iran. We had initiated talks with some aluminium smelting firms in Iran for the arrangement. Now, we are awaiting the right price offers for gas supplies from them,said the Nalco official cited above.

In the domestic market, Nalco's focus is on rolling out more value-added products. Nalco has agreed to supply up to 100,000 tonnes of molten aluminium every year at discounted price to the downstream units coming up at the aluminium park at Angul. The aluminium park is being set up by Nalco jointly with Odisha Industrial Infrastructure Development Corporation (Idco) on 216 acres of land. Bahrain-based Midal Cables and an aluminium metal powder company from Madurai have evinced interest to put up facilities in the park.