Russian firm taps Ruias for Orissa alumina plant

MUMBAI: It was in 2002 when the world's second largest aluminium company, Rusal, expressed an interest in the bidding for state-owned Nalco, Asia's largest alumina company. Although that didn't progress further as the government stopped the privatisation process for Nalco, the Russian company hasn't given up hope.

It has now been reliably learnt that Rusal has approached the Ruias of Essar to jointly build a 1 million-tonne alumina refinery plant in Orissa as part of its larger strategy to own alumina capacities across the world. The cost of building such a project is about $1 billion.

The steel-to-telecom Essar group had earlier announced a steel project in Orissa. Sources in the group said though there were informal talks with Rusal for an alumina plant, but "nothing has taken off." A spokesman for the group said: "There were informal discussions but nothing has been concluded." The group currently makes about 5 million tonnes of steel a year at its plant in Hazira, Gujarat.

Although the $15-billion Indian conglomerate hasn't publicly evinced interest of entering the non-ferrous sector, it has formed a business development team to explore "all" options, the sources added.

Interestingly, last year the Essar group formed a joint venture with metals maker Hindalco Industries to mine coal, a vital raw material in metal making. The coal mines are scheduled to be developed at the Mahan block in the Sidhi-Singrauli coalfields in Madhya Pradesh. Coal production is scheduled to start after 2009.

Orissa is home to one of India's largest bauxite deposits and has attracted global majors — Canada-based Alcan has teamed up with Hindalco under Utkal Alumina to build an alumina refinery in that state.

Rusal, which makes 4.1 million tonnes of alumina annually, is planning to double that production in the next five years. Access to cheap power is important in this sector as alumina, which is extracted from the mineral bauxite, is refined electrolytically to make the metal aluminium.

Companies that have access to cheap electricity can convert alumina into aluminium, while high energy cost regions have seen large-scale plant closures. Aluminium companies in North America and Europe are either closing plants or shifting manufacturing activities to areas with access to alumina and power.

Some of the large companies that had shut down units recently include Alcoa, Hydro, Pechiney and Mexico's Almexa Aluminio. Rusal had evinced interest in Nalco mainly because of its large alumina capacity, 1.6 million tonnes, which is made at a low cost.