BS reported that one will not fail to notice the convergence of thoughts of Mr BK Handique mines minister of India and Mr Klaus Kleinfeld CEO of the world’s largest producer of the white metal Alcoa, on the long term demand and price outlook for aluminum. Both believe the use of aluminum favored for its light weight, malleability and recycling qualities will continue to grow strongly through 2020. This will ensure the shifting of balance of supply and demand in favour of aluminum makers.
It is not comforting that while we have ownership of the world’s fifth largest bauxite resources of well over 3 billion tonnes including recoverable reserves in excess of 2.5 billion tonnes and our economy is growing at close to a double digit rate, the per capita aluminum consumption remains a low 1.3 tonnes. But as we have seen in recent times especially in the case of China, the metal use of an economy rises significantly when infrastructure and construction development is given a place of pride in the growth program.
When Mr Handique said that our aluminum production will take a major leap to 5 million tonnes by 2015 from 1.3 million tonnes now and demand, then will not trail supply, he is sure about the metal finding increasingly greater application in the earlier mentioned 2 sectors and also in transport. However, the electrical sector will account for the largest share of aluminum use, unlike in developed economies.
The building of nuclear power plants and our ambition to build aircraft locally are the other potentially large white metal use outlets. In fact, as Mr Kleinfield said that a growth industry like aerospace will need more and more aluminum globally.
Let’s take a count of how India will become a producer of 5 million tonnes of aluminum in another 5 years. After all aluminum is a long gestation industry, particularly because here it necessarily involves establishment of mines linkages. Not only the Niyamgiri fiasco of which the victim is the Vedanta group, but every other bidder for bauxite deposits be it in the government or the private sector will invariably be subject to the test of patience and excruciating delays in getting mines allotment and related clearances.
One which has come up trumps in the patience test and has built 3 Greenfield smelters with a capacity of 359,000 tonnes each and two alumina refineries of 1.5 million tonne capacity each is Hindalco. At the same time, the country’s leading copper to aluminum group is expanding the capacity of its Hirakud smelter to 360,000 tonnes from 155,000 tonnes.
Mr Kumar Mangalam Birla chairman of Hindalco said that the INR 40,000 crore investments will make the group including Novelis owner of 1.8 million tonnes of aluminum capacity.
The central government owned National Aluminum Company has quite a few capacity development ideas to be realized in the country and abroad. But Mr BL Bagra director of Nalco makes us understand that the first one to get off the ground will be the third phase expansion at its existing sites to lift capacities of the smelter, refinery and power complex to 630,000 tonnes, 3 million tonnes and 1,700 MW respectively. To build the second Greenfield smelter in Orissa, the company needs support of the state administration in acquiring new deposits and identifying a site alternative to Jharsuguda where it has been denied access on environmental grounds.
Mr Handique said that the country will need 10 million tonnes of aluminum by 2020. If supply of this order is to be had from local sources then Orissa, where the country’s major portion of bauxite is found and Andhra Pradesh will have to work as true facilitators of aluminum capacity development. Globally, large physical stocks, idle high cost capacity waiting for recommissioning on the back of sufficient recovery in aluminum prices and some large new smelters getting commissioned outside the West will explain why aluminum is now selling at over 30% discount to the July 2008 record prices. Aluminum is, however, doing a lot better now than the time when the industry was brought to its knees in the wake of the damaging recession.
Mr Kleinfeld said that as we go forward, it will become increasingly difficult to find new high quality mines to produce bauxite and sites for new refineries. Is he not suggesting that electricity availability and its cost will be important determinants of smelter sites? Electricity constitutes up to 40% of the cost of making aluminum. This explains why Nalco is looking at several offshore sites where the power cost for building smelters is low. Indonesia, where coal-fired electricity comes cheap, should be Nalco’s first overseas outing, provided everything falls in place.
（Sourced from www.business-standard.com）
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