Weak prices, Chinese exports might fuel capacity cut in aluminium: Nalco

Installed capacity of primary aluminium producers in India is 4.1 mn tonnes; 2014-15 ouput was 2.04 mn tonnes

Subdued prices and higher Chinese exports might curtail capacity and hinder new expansion projects in the aluminium sector globally, despite strong production levels in India and West Asia, said a top executive at National Aluminium Company (Nalco).

“Global prices of aluminium have remained under pressure on account of a number of factors, including the high global inventory of the metal, concerns about the performance of the Chinese economy and appreciation in the US dollar. Prices of aluminium are generally expected to remain low in the near-term due to subdued global demand for the metal as well as uncertain macro-economic environment prevailing globally,” Nalco's Chairman and Managing Director T K Chand said here in his address to shareholders at the company's 34th annual general meeting (AGM).

Despite weak economic growth, China is still expected to remain the key driver for global demand growth in the aluminium sector in 2015 and production losses would be offset by the continuous growth in output from China, he said.

Striking a note of optimism for the domestic aluminium producers, he said, after China, India is expected to register the highest increase in production considering the greenfield and brownfield expansion plans of Indian primary producers.  

Presently, the installed capacity of primary aluminium producers in the country is about 4.1 million tonnes per annum (mpta). In 2014-15, the aluminium production level in the country stood at 2.04 mtpa but this is expected to rise to the level of 2.5 mtpa in this financial year.

LME (London Metal Exchange) aluminium stocks, which were more than 5 mt at the beginning of 2014, declined to a level of 3.2 mt at the end of the year. Stocks are forecast to fall further in 2015.

Chand feels global demand for aluminium would be driven by sectors such as aerospace, automotive, packaging and commercial construction. Global aluminium production in 2014 stood at 54.11 mt while consumption was 53.97 mt.

In the domestic market, demand for aluminium is expected to be the highest in transport, building and construction sectors, but other sectors are also expected to grow simultaneously. It is estimated that by 2020, India would double its consumption to five mt.

Chand expressed concern at the dumping of aluminium by foreign players at a time when domestic producers were in the soup due to slump in metal prices.

“However, we have recently requested the Central government to hike the import duty and introduce safeguard duty to save the domestic industries,” he stated.

Commenting on its expansion, Nalco said it was pursuing the 0.5 mtpa smelter project at Kutch (Gujarat) based on bauxite supplies from Gujarat Mineral Development Corporation (GMDC).

In Odisha, Nalco has lined up an investment of Rs 22,000 crore on 0.5 mtpa smelter plant and 1050 Mw captive power plant in Sundargarh district. The navratna company is also adding a fifth stream of one mtpa capacity to its existing alumina refinery at Damanjodi in Koraput district. Bauxite for feeding this refinery stream would be sourced from Pottangi mines, reserved in favour of Nalco.

In the overseas market, Nalco is exploring possibilities to set up a greenfield smelter at a location where energy is available at competitive price. Nalco has short-listed Iran, Indonesia and Oman as possible locations for the overseas smelter.