Nalco to cut more capacity on coal prices

State-owned aluminium maker National Aluminium Co Ltd (Nalco), which cut up to eight per cent capacity last year, will shut more over the next fortnight.

“We are looking to shut down three-four per cent capacity, as the prices of imported and e-auctioned coal are unviable,” said B L Bagra, director (finance), Nalco.

Aluminium requires huge quantities of power, generated by burning coal. Close to 12 per cent of Nalco’s coal requirement is met through imports and e-auction and the rest is supplied by state-run miner Coal India Ltd.

The London Metal Exchange (LME) rates of aluminium have been hovering at around $2,000 (Rs 1.09 lakh) a tonne for a couple of years and nearly 60-70 per cent of aluminium production in the world is at a loss at this price.

“This is the reason a lot of companies have partly shut down their capacities and so has Nalco,” Bagra said. “Last September (2011), we had shut 90 pots but restarted 30 pots by March. So, those 60 pots remain shut even today. In percentage terms, it’s seven-eight per cent. We are considering putting some more pots out of service to make it 11-12 per cent.”

Bagra said the company would continue production to the extent of coal available from Coal India and avoid using imported or e-auctioned coal. “So, the top line can increase without adding much to the profits.”

He added: “So, we have decided to continue production till coal from linkage is available and not with the help of the imported coal or the e-auctioned coal because the cost of power generation from these two sources comes to Rs 5.5 per unit, which is unsustainable.”

So, some additional pots are likely to be taken off the line in 10 days. “This will leave us with full cost recovery in the smelter,” Bagra said. Nalco’s profits fell sharply in the quarter ended September 30, because of the higher power costs. It hopes to correct the problem in the current quarter and expects to post better results.