Nalco can gain Rs 250 cr on alumina sale to Vedanta

Company, however, not keen on selling alumina to Vedanta as they are competitors, say Nalco sources

National Aluminium Company (Nalco), which has an exportable alumina surplus of nearly one million tonne per annum, stands to gain Rs 250 crore if it agrees to sell the intermediate product to its competitor - Vedanta Aluminium Ltd (VAL).

The business deal, though apparently lucrative, is not tempting enough for Nalco, which prefers to export the surplus alumina.

According to a VAL source, “Nalco can save up to $22 a tonne (or Rs 1,200) towards alumina transportation cost from Damanjodi to Visakhapatanam. This includes Rs 600 per tonne of railway freight, Rs 300 a tonne towards port handling charges, Rs 150 per tonne for operation and maintenance and Rs 200 a tonne for loading and unloading at port.”

"In their last tender for export of 30,000 tonne of alumina, Nalco had quoted a price of $323 a tonne (or Rs 17,568). If Nalco does not transport bauxite from its refinery site, its price will be roughly $300 a tonne. We are ready to pay them $355 (or Rs 19,308) per tonne. On accepting our offer, Nalco can gain Rs 240-250 crore per annum on selling nearly one million tonne of alumina”, he added.

Says a Nalco source, “Since both Nalco and Vedanta are competing in aluminium business, the navratna company is not keen on selling alumina to VAL. A final decision, however, will be taken shortly by the Nalco board of directors”.

Anshuman Das, Nalco's acting chairman cum managing director did not respond to phone calls.

Nalco's financial performance was stressed in the July-September quarter. Supply disruptions of coal coupled with receipt of poor quality dry fuel during the monsoon season tanked Nalco's net profit by 96.4% in the quarter at Rs 5 crore against Rs 139 crore achieved in the corresponding period of last fiscal.

On the other hand, VAL, which was forced to go for temporary shutdown of its Lanjigarh refinery on December 5 last year for bauxite unavailability, has been persistently urging Nalco to supply alumina. It had even offered a premium of 7-10% over Nalco's export price of alumina, but to no avail.

"It is baffling why Nalco is not reacting favourably to our offer. If we lift alumina from their Damanjodi refinery, they (Nalco authorities) can save $20-25 a tonne towards logistics cost to Visakhapatanam port and port handling charges. VAL is also ready to pay premium over Nalco's export price for alumina”, said a senior VAL official.

"We are in continuous dialogue with the Nalco authorities and the Central mines ministry on the matter”, he added.

Alumina is indispensable for VAL to run its smelting facility at Jharsuguda. After shutdown of its refinery, VAL was importing alumina to keep afloat its aluminium smelting unit.

"Running the smelting facility by importing alumina is not sustainable for long. We are in dire need of bauxite for alumina production. But as of now, there is no hope of supplies from alternative sources”, the official added.

To run the one million tonne per annum (mtpa) refinery plant at full steam, VAL needs 3,00,000 tonnes of bauxite every month. VAL had designed its refinery in Odisha keeping in mind the locally available bauxite. The aluminium major had entered into an agreement with state controlled miner Odisha Mining Corporation (OMC) for supply of bauxite. But attempts to mine bauxite at the ecologically sensitive Niyamgiri hills under the OMC’s leasehold were red flagged by the environment ministry that scrapped the Stage-II forest clearance on August 24, 2010.

The company’s bid to continue the refinery operation by sourcing bauxite from other states like Gujarat, Maharashtra, Chhatishgarh, Jharkhand and Andhra Pradesh was also thwarted by various logistic, regulatory and procedural issues.