Nalco sets all-weather business model to face global slowdown

Model is based on cutting production cost, raising output through modernization and brownfield expansion and upstream & downstream integration

 

In view of the slump in the world aluminium market, the National Aluminium Company (Nalco) has developed an all-weather business model to maintain profitability.

"Given the tough going in the market, Nalco, a leading foreign exchange earner for the country amongst the central public sector enterprises (CPSEs), has developed a new corporate plan with a new business model that will withstand market onslaughts and keep the company afloat with profitability. The new business model shall insulate Nalco from the vagaries of market," said Tapan Kumar Chand, chairman and managing director, Nalco.

The new model is based on reducing the cost of making aluminium making and increasing the volume of production through modernization and brownfield expansion and upstream and downstream integration.

Besides, the new model also envisages diversification into green power, nuclear power, IPP, rare metal like titanium, recovery of iron from red mud waste and merchant mining that are immune to downturn in metal market.

"We have already formed a joint venture company with Gujarat Alkalies & Chemicals Limited for a caustic soda plant at Dahej in Gujarat. We are also exploring the opportunity to set up a greenfield aluminium smelter abroad, where energy would be available at a competitive price. The company has started discussions with Iran, Oman, Qatar and Indonesia in this regard," Chand added.

It may be noted that global aluminium production has out-passed consumption by 2.6 per cent, making a surplus of about 1.4 million tonnes in 2015. Slowdown in consumption in China has resulted in dumping of surplus production of that country in international market, making a steep fall in metal prices.

Presently, the aluminium prices are moving in a narrow band of around $1500 per tonne much below the cost of production of primary producers. About 70 per cent of companies in the world have reported cash loss. Many smelters have been closed and many more are resorting to production cut, the company said.

On the Indian scenario , Chand said that though the consumption in India has increased by six per cent, mainly on account of increase in demand in electric and electronics sectors, increase in import has become a matter of serious concern as volume of import has exceeded 1.6 million tonnes in 2014-15 and is continuously on the rise.

"Aluminium import constitutes 56 per cent of total domestic consumption of metal, leaving only 44 per cent of the market to domestic producers," Chand added.