Nalco to go for toll-smelting of aluminium in Iran

The arrangement is a precursor to the company's proposal to set up greenfield smelter at Chabahar

Taking advantage of availability of cheap gas based power in the Gulf region, National Aluminium Company (Nalco) plans to go for toll-smelting arrangement soon with three Iranian companies to produce aluminium.

Nalco CMD, T K Chand, who was in Iran recently as part of an Indian business delegation, has already held preliminary discussion in this regard with top officials of the government there and state-owned Iranian Mines & Mining Industries Development & Renovation Organization (IMIDRO).

"Nalco is exploring the possibilities of toll-smelting in Iran through IRALCO (Iranian Aluminium Company), Al-Mahadi, and SALCO. If things work out, the toll-smelting can be done in next 3 to 4 months", Chand said.

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This arrangement, he said, will be a precursor to the proposal to set up an 0.5 million tonne per annum aluminium smelter and 1,000 Mw gas based power complex at Chabahar free trade zone in Iran.

Through toll-smelting, Nalco intends to convert its alumina, currently exported to the international market, to aluminium by paying a tolling fee to the concerned companies.

Nalco annually exports about one million tonnes of alumina. If it is converted to aluminium, the topline of the company would go up significantly as the sale price of aluminium is six times that of alumina.

What has prodded Nalco to go for toll-smelting or an aluminium smelter in Iran is the availability of low cost power there. Energy cost constitute nearly 40 per cent of cost of producing aluminium. In Odisha, Nalco is sourcing power from its captive generating plant at Rs 2.60 per unit. The gas based energy in Iran is available at half this rate, Chand said.

Meanwhile, Nalco and IMIDRO have constituted a joint task force to pursue the greenfield smelter cum power complex project at Chabahar free trade zone.

The task force, consisting of senior project executives of Nalco, IRALCO and officials from Iran's industries ministry, is expected to submit a feasibility report on the project in three months.

"This project, to be set up in joint venture, is expected to be highly cost competitive combining the advantages of low cost Nalco alumina and low cost Iranian energy", Chand said.

Based on the report submitted by the task force, the ownership pattern, project financing, long-term supply of gas and other aspects of the proposed smelter project would be decided.

Nalco, for some time, had been looking to set up a greenfield smelter at a place where energy is available at competitive price. The company had shortlisted Iran, Indonesia and Oman as possible locations for the overseas smelter.

While it dropped Indonesia on the ground of logistics problems, it has chosen Iran over Oman because of energy cost advantage, sources said.