Nalco develops all-weather biz model to tackle slump

Aluminium major NALCO has worked out a new corporate plan and business model that will ensure profit through diversification, cost cutting and other means in a bid to withstand market onslaughts and slump cycle, company CMD Tapan Kumar Chand said today.
"Given the tough going in the market, Nalco has developed a corporate plan with a new business model that will withstand market onslaughts," Chand said in a statement.
The new 'all-weather model' would also keep the company, which is the leading foreign exchange earner among the CPSEs, afloat with profitability, the CMD said.
The New Business Model (NBM) would insulate Nalco from the vagaries of market, Chand said adding it also strengthens the company's aluminium business by reducing the cost with increase in volume of production through modernisation and brownfield expansion and upstream and downstream integration.

Besides, the model 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, he said.
Noting that world aluminium market is sluggish and is in slump cycle, the Nalco CMD said the company has already formed a joint venture company with Gujarat Alkalies & Chemicals Ltd 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," Chand said.

A new model was required as global aluminium production has out-passed consumption by 2.6 per cent, making a surplus of roughly 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, he said.
At present, aluminium prices are moving in a narrow band of around USD 1,500 per tonne, much below the cost of production of primary producers. With 70 per cent of companies around the world reporting cash loss, many smelters have been closed and many more are resorting to production cut.

On Indian scenario, the head of the Navaratna CPSE said though consumption is inching up by 6 per cent, mainly on account of increase in demand in electric and electronics sectors, rise 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," says Chand.