VISION DOCUMENT

2009-2020
 Contents

PART-I

Chapter 1. Introduction

1.1 Introduction .........................................................................................................1

Chapter 2. Aluminium Metal

2.1 Discovery, Properties and Economic role............................................................3

2.2 Approach of the Industry ....................................................................................4
2.3 Aluminium Facts .................................................................................................5
2.3.1 Europe ...............................................................................................................5
2.3.2 China..................................................................................................................6
2.3.3 Australia.............................................................................................................6
2.3.4 USA ...................................................................................................................7
2.3.5 Brazil..................................................................................................................7
2.3.6 Canada ...............................................................................................................7
2.3.7 Others.................................................................................................................7

Chapter 3. Aluminium Industry

3.1 A Global Overview..............................................................................................8

3.2 Bauxite .................................................................................................................8
3.3 Alumina ...........................................................................................................10
3.3.1. Demand & Price of Alumina ..........................................................................14
3.4. Aluminium ........................................................................................................16
3.4.1. Inputs/ Raw Materials.....................................................................................18
3.4.1.1. Electricity.....................................................................................................18
3.4.2. Demand & Price of Aluminium .....................................................................20
3.5. Environmental Challenges................................................................................22
3.6. Emerging Trends...............................................................................................23

Chapter 4. Global Aluminium Majors

4.1 Introduction .......................................................................................................25

4.2 Alcoa .................................................................................................................25
4.3 Alcan Inc............................................................................................................25
4.4 United Company RUSAL .................................................................................26
4.5 ALCAN - Pechiney Co Ltd ..............................................................................27
4.6 BHP Billiton .....................................................................................................28
4.7 Aluminium Corporation of China Limited ........................................................28
4.8 Rio Tinto ............................................................................................................29

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Chapter 5. Indian Aluminium Industry

5.1 Introduction .......................................................................................................30

5.2 Recycling ..........................................................................................................31
5.3 Consumption Pattern..........................................................................................32
5.4 The Down Stream Scenario ..............................................................................32
5.5 The Domestic Players ........................................................................................33
5.6 The Price Mechanism ........................................................................................34
5.7 Emerging Trends in India ..................................................................................34

Chapter 6. National Aluminium Company Limited (NALCO)

6.1 The Origin and Growth Profiles ........................................................................36

6.2 Capacity Utilisation ...........................................................................................37
6.3 Resource Generation & Application..................................................................40
6.4 Technology & Patents .......................................................................................43
6.5 Infrastructure Engineering .................................................................................44
6.6 Marketing...........................................................................................................44
6.7 Human Resource Management ..........................................................................46
6.8 Organisation Structure .......................................................................................48
6.9 Quality Movement .............................................................................................47
6.10 Computerization...............................................................................................48
6.11 The Competitiveness of NALCO ....................................................................49
6.11.1. Global Positioning of NALCO- Alumina & Aluminium ...........................49
6.11.2. Production and sales of Alumina of HINDALCO & NALCO.....................52
6.11.3. Other Financial and Physical Parameters of Competitive Profile of
NALCO...............................................................................................................53
6.12 Alumina and Aluminium Technology of NALCO & Others ..........................56
6.12.1.Technology of Alumina and Aluminium Industry ........................................56
6.12.2. Alumina Technology of Major Players of India and World.........................62
6.12.3. Aluminium Technology of Major Indian as well as world Players ..............63
6.12.4. Comparison of NALCO and its Competitors w.r.t. inputs ...........................65
6.13. Business Strategies ..........................................................................................69
6.14. Awards & Recognition of NALCO & HINDALCO .......................................70

Annexure- A…………………………………………………………………71

PART-II

Vision and Mission .................................................................................................73

Objective & Goals

iii
VISION DOCUMENT

2009 – 2020

PART-I

BASIC INFORMATION

iv
 Chapter –I

INTRODUCTION

1.1. Introduction

NALCO was incorporated in 1981 as a Public Sector Enterprise of the Government of India, is
Asia's largest integrated aluminium complex, encompassing bauxite mining, alumina refining,
aluminium smelting and casting, power generation, rail and port operations.

Commissioned during 1985-87, Nalco has emerged to be a star performer in production and
export of alumina and aluminium, and more significantly, in propelling a self-sustained
growth. The various project segments went into commercial production during 1987-88. Since
then there have been various internal exercises as well as consultancy interventions in
preparation of Corporate Plans, Strategic Plans and Organization Redesign models.

The first Corporate Plan was made with expert assistance of Indian Institute of Management,
Ahmedabad in 1993. On the direction of the Board, this plan was internally reviewed to evolve
a 10 year strategic plan covering 1995-2005 periods. The Company has largely pursued this
plan, duly approved, by the Board.

Implementation of new economic policies of the Government necessitated review, renewal

and repositioning the corporate goals for NALCO. Accordingly, a draft futuristic document
named VISION 2020 was prepared and presented to the Board for consideration during
November, 2000. The draft document has been further modified in light of the comments and
suggestions received from the Board. This document was an internal effort of the Company
based on the shared perceptions and projections made by the executives of the Company at
various levels.

Later on, Management Development Institute, Mehrauli Road, Gurgaon was assigned the task
of revisiting the vision and mission of the NALCO. The main objectives of the assignment
were “development of a vision document with objectives of planning for future business
development including corporate growth plan for making NALCO a major international
corporate entity”. For the first part, that is developing new vision and mission for NALCO,
consulting team conducted workshops at all major units of NALCO with a view to arrive at
common consensus on vision and mission statement of NALCO. For the preparation of
corporate plan which is second part of the report, team relied upon published materials of
aluminium industry within and out the country, verbal discussion with experts in the field,
annual reports of NALCO & other major industry in the sector, and rich accessible data
available with respect to various parameters of the aluminium sector on the Internet about
various industries across the world.
Subsequently 235th board of NALCO desired to prepare Corporate plan for ten years. The in-
house Vision statement and Corporate plan, has been made largely based on the data and
information collected by MDI along with internal data.

It is felt that once the plans and programmes put forward in this document are approved in
principle and implemented as per the schedule, the Company (NALCO) will achieve stated
goal of being a major international entity in Metal, and Energy Sector.

2
 Chapter -II

ALUMINIUM METAL

2.1. Discovery, Properties and Economic role

Aluminium, which is the 3rd most abundant element in earth’s crust, was separated as a metal
in the year 1825. It took many years of painstaking research to produce aluminium on
commercial scale. The inventions of the electrolytic reduction process known as Hall-Heroult
process in 1886 and the Bayer Process for large-scale production of alumina from bauxite in
1889, truly led to the growth in production and applications of aluminium.

The global production of aluminium has risen from 15 tonnes in 1885 to more than 34 million
tonnes in 20061, with nearly 127 percent increase seen since 1985. In addition, about 16
million tonnes of aluminium is recycled per annum. Thus nearly 50 million tonnes of
aluminium is available per annum to the world market.

Aluminium is a unique metal; strong, durable, flexible, impermeable and light-weight, it does
not rust and is 100 percent recyclable. It comes in a variety of surface finishes and can take
many forms, allowing its use in a vast array of products. Among the non-ferrous metals
aluminium is young. Yet its production surpasses the total world production of copper, lead
and tin combined together. Aluminium total production is at 50 million tonnes during 2006 in
comparison with 17 million tonnes of copper, 8 million tonnes of lead and 0.4 million tonnes
of tin. In terms of production and consumption aluminium is only second to steel.

Table 2.1: Aluminium Properties & Applications

Aluminium can be alloyed with other Aluminium can be rolled into plates, sheets,
materials to make an array of metals with or wafer thin foils. The rolling process
different properties. The main alloying changes the characteristics of the metal,
ingredients are iron, silicon, zinc, copper making it less brittle and more ductile.
and magnesium.
Aluminium can be cast into an infinite Aluminium can be extruded by heating it to
variety of shapes. The statue of Eros in around 500°C and pushing it through a die
London’s Piccadilly Circus erected in 1893 at great pressure to form intricate shapes and
is cast aluminium. sections.
Aluminium can be forged by hammering to Aluminium can be joined by welding,
make stress-bearing parts for aircraft and adhesive bonding, riveting or screwing. It
internal combustion engines. can be formed by bending or super plastic
moulding. It can be milled or turned on a
lathe.

1
http://www.world-aluminium.org/About+Aluminium/Story+of

3
 The properties of aluminium can be The appearance can be modified by surface
modified through heat treatment or treatments such as anodizing or powder
mechanical working. coating.
Aluminium powder, flake and paste are Aluminium Chemicals are important in
formed by blowing gas under pressure at water treatment, papermaking, fire
molten aluminium. These products are used retardants, fillers and pharmaceuticals.
in explosives, rocket fuel, metallurgy,
chemicals, inks, and decorative materials.

Aluminium being light, ductile, durable, non-magnetic, good conductor of heat and electricity,
it has found ever increasing uses in transportation, electrical, construction and packaging
industries. Aluminium is the mainstay of long distance electrical power transmission. In
transportation sector aluminium plays a key role in saving energy and reducing pollution. High
aluminium content vehicles can be up to 50 per cent lighter than the conventional vehicles.
Lighter cars, truck and trains mean less fuel consumption and less emission of carbon dioxide.

The other biggest advantage of aluminium comes from the fact that the products made from
aluminium can be recycled repeatedly to produce new products. This helps to save energy as
well as mineral resources needed for primary production. On several counts aluminium is
considered to be an environmentally sustainable material and because of its recyclability
production of aluminium is considered as an investment for the future generation.

2.2. Approach of the Industry2:

The industry employs a lifecycle approach to address the challenges of climate change,
focusing not only on the energy required to produce aluminium products but also on the
energy savings to be made through their use and reuse. It is in the use phase that the majority
of energy is used and/or saved (e.g. during the useful life of cars, buildings, aircraft, etc). The
high strength-to-weight ratio of aluminium plays a crucial role in producing lighter vehicles
and other forms of transport, reducing fuel consumption without compromising performance
and safety. The use of lightweight aluminium components in a vehicle can save six to twelve
times the energy taken to produce the primary aluminium used in its construction. Up to eight
per cent fuel savings can be realized for every 10% reduction in weight. One kilogram of
aluminium, used to replace heavier materials in a car or light truck, has the potential to
eliminate 20kg of CO2 over the lifetime of the vehicle. For other vehicles, such as trains,
ferries and aircraft, the potential savings are even greater.

Climate change is a challenge that the aluminium industry shares with every business and
everyone who participates in the global economy. As the world moves to combat climate
change, the aluminium industry is moving too. With its immense versatility, smart uses of
aluminium will be an important part of finding solutions across many applications, and the
market for aluminium will grow and diversify.

2
http://www.world-aluminium.org/About+Aluminium/Story+of

4
 The global aluminium industry has therefore developed a four-pronged voluntary strategy to
meet the challenges of climate change, which encompasses the full lifecycle of aluminium
from production, to primary use, to recycling and reuse:

i. Reduce greenhouse gas emissions from aluminium production;

ii. Increase energy efficiency in aluminium production;
iii. Maximize used-product collection, recycling and reuse;
iv. Promote the light-weighting of vehicles.

2.3. Aluminium Facts

The Aluminium Industry makes significant contributions to the global economy as well as to
many individual nations. It has witnessed an average growth of 8.3% in last 5 years. That is
10.5% in 2007 with 2008 projected at 9% and 2009 at 8%. Mainly it is driven by demand in
China. The details statistics for the years 2005 to 2009 given in Table 2.2 also indicates very
high growth in china and former east bloc. It is also suggested by the industry experts that the
aluminium industry will grow in the range of 6-7% in the long run. Further, some additional
statistics is given in the subsequent sections of the chapters with respect to major aluminium
producing regions and countries with a view to have an overview of aluminium industry in
these countries /regions.

Table 2.2: Primary Aluminium Demand Outlook3

1000 tonnes Annual Percent Growth

Region 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
United States 6,149 6,179 5,608 5,487 5,694 -3.5% 0.5% -9.2% -2.2% 3.8%
North America 6,952 7,025 6,433 6,304 6,551 -2.6% 1.1% -8.4% -2.0% 3.9%

Total Western Europe 6,683 6,932 7,213 7,295 7,493 1.9% 3.7% 4.1% 1.1% 2.7%
Japan 2,405 2,441 2,448 2,436 2,480 -1.0% 1.5% 0.3% -0.5% 1.8%
Total Asia 6,853 7,190 7,461 7,681 8,013 3.9% 4.9% 3.8% 2.9% 4.3%

Western World 22,638 23,354 23,413 23,673 24,562 1.5% 3.2% 0.3% 1.1% 3.8%
China 7,105 8,700 12,000 15,000 17,250 19.1% 22.4% 37.9% 25.0% 15.0%
Former East Bloc 8,995 10,734 14,267 17,394 19,814 15.8% 19.3% 32.9% 21.9% 13.9%

Total World 31,633 34,088 37,680 41,068 44,375 5.2% 7.8% 10.5% 9.0% 8.1%

2.3.1. Europe:

Europe produces 4.7 million tonnes of bauxite4, and has to import a multiple of it, an extra
14.6 million tonnes for its total needs. The total tonnage of bauxite is processed into 8.6

http://www.aluminum.org/AM/Template.cfm?Section=News_Statistics&TEMPLATE=/CM/ContentDisplay.cfm&C
ONTENTID=26294#19
4
http://www.eaa.net/en/statistics/

5
 million tonnes of alumina production in Europe. Also here Europe needs to import another 2.7
million tonnes to fulfill the demand of the primary producers in Europe. From a total
aluminium metal supply of 13.2 million tonnes in 2006, 39% is produced by European
primary smelters, 22% is net-imported and 39% is recycled by European refiners and
remelters. The usage of Aluminium products in Europe is given in the following fig 2.1.

Shipments of foilstock make up the largest end-use market for rolled products, 22%, in
Western Europe. In 2006 The most recent estimate for the total workforce in the European
Aluminium industry amounts to 2,36,570 persons. This number includes the 15 EU countries
plus Norway, Switzerland and Turkey. In the European Union the workforce in the aluminium
industry counts about 200,000 persons in 3000 aluminium companies. The indirect
employment of persons working with aluminium can amount to one million persons in
Europe., rigid packaging accounted for 19% of all flat rolled products shipments, the share of
stockists increased to 18%, while the transport market was close to 14%.

Fig.2.1: End-use Markets of Aluminium in Europe

2.3.2. China:

China5 is still the most important driver in the global aluminum consumption growth with the
growth rate of 22.6%. The increase of consumption in China is reflected by the fields like
construction, electric power and transportation and so on. Chinese Aluminium Industry
production has reached 963,000 tonnes6 in March 2007. Alumina production in China grew
53.7% to surpass 4.27 Million Tons in the first quarter of 2007 owing to a countrywide
capacity expansion. However, the production of alumina in March ’07 grew 65.30% YOY to
reach 1.658 Million Tons, representing a 24.36% up from February this year.

2.3.3. Australia :
Australia7 is the world's largest producer of bauxite, producing 67 mt of world bauxite
production in 2007. Australia is the largest producer and exporter of alumina, producing 19
mt (24%) of world alumina production in 2007. Australia is the fifth largest aluminium
5
http://www.electronics.ca/reports/materials_dielectrics/electrolytic_aluminum.html
6
http://www.newswiretoday.com/news/17892/
7
http://www.aluminium.org.au/Page.php?s=1030

6
 producer, with 2.0 mt (5.3%) of world aluminium production in 2007. In 2007, the
bauxite/alumina/aluminium operations employed over 13,800 direct employees and around
3,500 contractors.

2.3.4. USA:

The aluminium industry8 of the US is the world's largest single producer of primary
aluminium. The US industry operates over 300 plants in 35 states, produces more than 23
Billion pounds of metal annually, and employs over 145,000 people with an annual payroll of
about US$ 5 Billion. Aluminium is one of the few products and industries left in America that
truly impacts every community in the country, either through physical plants and facilities,
recycling, heavy industry, or consumption of consumer goods. By volume, the US aluminium
industry is projected to grow by 210,000 Metric Tons (nearly 9%) during 2007-2011,
attributed to enhanced energy supply capacity, new cost efficient production technologies and
government support. Market demand is largely fuelled by the need for aluminium by various
industry sectors, particularly transport and packaging sector. Aluminium is chiefly imported
from a number of countries, such as Canada, Russia, China and Mexico, where the cost of
production is relatively less. It could be a market for Indian Aluminium industry also.

2.3.5. Brazil:

In Brazil9 the aluminium industry is responsible for 3% of the exports and 50,000 jobs. In
addition, Brazil Aluminium Recycling Market generates more than 130,000 of non-specialized
jobs. Today the aluminium can life cycle in Brazil is less then 30 days from the first utilization
to the second or recycled one.

2.3.6. Canada

With a production of 2.7 million tons, Canada10 is the world's third largest producer of
aluminum, a metal with unlimited applications. Canada’s primary aluminium production
capacity is 3,011,000 tonnes during 2006. It has employed more than 21000 people.

2.3.7. Others

Norwegian Aluminium Industry generates 2% of Norway’s GNP. The bauxite and aluminium
oxide (alumina) industry is the largest industrial sector of Jamaica’s economy. Aluminium
accounts for about 80 per cent of the unloaded weight of an aircraft Aluminium has made
aviation and related tourism industry feasible. The growth of tourism industry, which employs
some 24 million people in the world, is also attributed to the economic role of aluminium.

8
http://www.reuters.com/article/pressRelease/idUS206270+07-Jan-2008+BW20080107
9
http://www.oecd.org/dataoecd/13/9/40798814.pdf
10
http://www.aac.aluminium.qc.ca/index2.html

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 CHAPTER- III

ALUMINIUM INDUSTRY

3.1. A Global Overview

Aluminium is the third most abundant element in the earth's crust and constitutes 7.3% by
mass. Aluminum is the third-best performing industrial metal in the World. Aluminium is a
young metal, having only been produced commercially for 153 years. Annual primary
production of aluminium in 2006 was around 34 million tonnes and recycled production
around 16 million tonnes. The total of some 50 million tonnes compares with 17 million
tonnes of copper, 8 million tonnes of lead and 0.4 million tonnes of tin which are in use for
more than thousands years. Aluminium industry has three major interdependent segments,
bauxite mining, alumina refining and aluminum smelting. Since power is required in large
quantities for the smelting, therefore, source and cost of power play an important role in
aluminum industry.

Bauxite, the ore from which aluminium is made, mainly occurs in tropical and sub-tropical
areas of the earth. Bauxite is a naturally occurring, heterogeneous material composed
primarily of one or more aluminum hydroxide minerals, plus various mixtures of silica, iron
oxide, titania, alumino silicate, and other impurities in minor or trace amounts. The principal
aluminum hydroxide minerals found in varying proportions with bauxites are gibbsite and the
polymorphs boehmite and diaspore. Bauxites are typically classified according to their
intended commercial application: abrasive, cement, chemical, metallurgical, refractory, etc.
The bulk of world bauxite production (approximately 85%) is used as feed for the manufacture
of alumina which is then electrolytically reduced into metallic aluminium. Approximately
three tonnes of bauxite yields one tonnes of alumina. Two tonnes of alumina produces one
tonne of aluminium metal.

Primary aluminium production facilities are located all over the world, particularly close to
cheap sources of energy. Similarly in many cases alumina refineries are located close to
bauxite sources. The bauxite, alumina and aluminium production scenarios are presented in
the following sections of this chapter.

3.2. Bauxite

Bauxite is the base raw material for aluminium production. The major bauxite deposits of the
world are found in tropics and in Caribbean and Mediterranean regions. Compounds of iron,
silicon and titanium are some of the impurities found in bauxite ore. These impurities, as well
as the percent of alumina content in ore influence the processing and economics of bauxite
mining. Innovations in Bayer’s process have made refining of alumina from low-grade bauxite
feasible. Bauxite resources are estimated to be 55 to 75 billion11 tons, located in Africa (33%),

11
http://minerals.er.usgs.gov/minerals/pubs/commodity/bauxite/mcs-2008-bauxi.pdf

8
 Oceania (24%), South America and the Caribbean (22%), Asia (15%), and elsewhere (6%).
India has around 6% of the world total. The known reserves of high quality bauxite are
considered sufficient to provide 300 years of supply. The major Bauxite Reserves (as defined
in annexure) and Bauxite Reserve Base (as defined in annexure) statistics is given in table 3.1.
As evident from statistics Guinea has 29% of the reserve followed by Australia, Jamaica and
Brazil. According to another statistics, Guinea possesses over 25 billion12 metric tons (MT) of
bauxite - and perhaps up to one-half of the world's reserves.

Table 3.1: Major Bauxite Deposits of the World during in 200813 (In ’000 tons MT)
SN Country Reserves % Share Reserve % Share
base
1. Australia 5,800,000 21.48 7,900,000 20.78
2. People's Republic 700,000 2.59 2,300,000 6.05
of China
3. Brazil 1,900,000 7.03 2,500,000 6.57
4. Guinea 7,400,000 27.4 8,600,000 22.63
5. Jamaica 2,000,000 7.4 2,500,000 6.57
6. India 770,000 2.85 1,400,000 3.68
7. Russia 200,000 0.74 250,000 0.65
8. Venezuela 320,000 1.18 350,000 0.92
9. Suriname 580,000 2.14 600,000 1.57
10. Kazakhstan 360,000 1.33 450,000 1.18
11. Greece 600,000 2.22 650,000 1.71
12. Other countries 3,400,000 12.59 4,000,000 10.52
13. World total 27,000,000 100.00 38,000,000 100.00
(rounded)
Source: U.S. Geological Survey, Mineral Commodity Summaries, January 2009

The statistics with respect to major bauxite producing counties is given in table 3.2 for the year
2005 to 2008. It can be seen from the data that China contribution has increased from 11.65%
in 2005 to 16.84% in 2007. The production in Brazil & India have also witnessed a
continuous growth during the year 2006 & 2007 & also in 2008.Production in Guinea &
Jamaica have increased between 2007 and 2008.

12
http://en.wikipedia.org/wiki/Guinea
13
http://en.wikipedia.org/wiki/Bauxite

9
 Table 3.2: Major Bauxite Producing Countries of the World & their production
in 200814 (In 000 Metric tons)
SN Mine production
Country
(In ’000 Metric tons)
2006 % 2007 % 2008 %
1. Australia 62,300 35.00 64,000 33.68 63,000 31.50
2. People's Republic 21,000 11.80 32,000 16.84 32,000 15.60
of China
3. Brazil 21,000 11.80 24,000 12.63 25,000 12.19
4. Guinea 14,500 8.15 14,000 7.37 18,000 8.78
5. Jamaica 14,900 8.37 14,000 7.37 15,000 7.31
6. India 12,700 7.13 13,000 6.84 20,000 9.75
7. Russia 6,600 3.71 6,000 3.16 6,400 3.12
8. Venezuela 5,500 3.09 5,500 2.89 5,900 2.78
9. Suriname 4,920 2.76 5,000 2.63 4,500 2.15
10. Kazakhstan 4,800 2.70 4,900 2.58 4,800 2.34
11. Greece 2,450 1.38 2,400 1.26 2,200 1.07
12. Other countries 5,460 3.07 6,800 3.58 6,800 3.31
13. World total 178,000 98.95 190,000 100.84 190,000 100.84
(rounded)

3.3. Alumina

Alumina is an intermediate chemical product obtained from refining of bauxite mostly

for production of aluminium. Only about 10 percent of alumina production finds application in
plastic, paper, paint, refractory and ceramic industries. Many developing countries, which
have plenty of bauxite, prefer to produce alumina than aluminium because of high cost of
power. Thus alumina is exported to energy surplus or cheap energy countries where large
smelting facilities are available. International trading of alumina has steadily increased during
last two decades. Alumina refining capacity has increased from a level of 36 million tonnes in
1980 to around 60.5 million metric tonnes in 2008 as per the statistics given in table 3.3.
Australia alone accounts for about 26% of world production. The world production capacities
of alumina are presented in table 3.4. It is evident from the facts given in table 3.3 and table
3.4 that there is a huge gap between capacities available and capacities exploited. The total
production capacity of Alumina is 64.13 million tonnes in 2008 where as production is
recorded 60.5 million metric tonnes. Additional production facilities are coming up in all parts
of the world but proportionality more in Australia and Asian regions. It means Alumina
production will increase in years to come if companies willing to utilize their total capacities
and demand are also increasing.

14
http://en.wikipedia.org/wiki/Bauxite

10
 Table 3.3: World Production of Alumina (In million metric tons)15
SN Continent 1997 2001 2004 2005 2006 2007 2008
1. Africa 0.527 0.675 0.779 0.736 0.530 0.526 0.595
2. North America 6.223 5.476 6.887 6.928 6.799 6.104 6.16
3. Latin America 9.989 10.874 13.076 13.188 14.872 15.111 15.768
4. Asia 3.751 4.284 5.397 5.395 5.364 5.563 5.993
5. West Europe 5.474 5.927 6.377 6.560 6.748 6.809 6.951
6. East/Central 5.301
3.875 4.940 5.381 5.430 5.475 5.528
Europe
7. Oceania 13.458 16.346 16.975 17.920 18.607 19.2494 19.728
Total 43.297 48.488 54.872 56.157 58.395 58.890 60.496

Table 3.4: World Production Capacity of Alumina (In million tons MT)16
SN Continent 1997 2001 2004 2005 2006 2007 2008
1. Africa 0.640 0.670 0.778 0.737 0.530 0.527 0.59
2. North America 6.705 6.779 6.960 7.078 7.083 7.153 7.238
3. Latin America 11.311 12.6424 13.498 15.082 15.640 16.188 17.987
4. Asia 4.740 5.550 6.211 6.260 6.332 6.854 7.751
5. West Europe 5.403 6.220 6.292 6.586 6.834 6.870 6.955
6. East/Central 5.312
4.807 5.137 5.433 5.536 5.533 5.561
Europe
7. Oceania 13.634 16.325 17.662 1.135 19.595 20.717 21.789
Total 47.240 53.305 56.834 59.414 61.547 63.870 64.126

Region wise alumina annual production capacities are presented in table 3.5. Total world
production is divided in to seven regions. It is evident from table 3.5 that the maximum
capacity is in Area 7 that is Oceania followed by Area 3 which consists of countries from
Latin America. It is forecasted that alumina capacity will increase to 72,582 thousand tomes in
December 2010 from 61,912 in June 2007. It means the capacity will witness a growth of
about 17%.

15
http://stats.world-
aluminium.org/iai/stats_new/historical.asp?currentYear=2007&material=2&formType=1&dataType=&period=4&fr
omYear=1997&fromMonth=1&toYear=&toMonth=1&area=&submitSearch=Find+Stats
16
http://stats.world-
aluminium.org/iai/stats_new/historical.asp?currentYear=2007&material=2&formType=2&dataType=124&period=4
&fromYear=1997&fromMonth=1&toYear=&toMonth=1&area=&submitSearch=Find+Stats

11
 Table 3.5: Reported Alumina Annual Production Capacity (’000s of Metric Tons)17
At end of: Area Area Area Area Area Area Area Total
1: 2: 3: 4/5: 6A: 6B: 7:
June 2007 470 7,053 16,142 6,354 6,856 5,561 19,476 61,912
December 527 7,153 16,188 6,854 6,870 5,561 20,717 63,870
2007
June 2008 627 7,193 17,230 7,226 6,955 5,560 21,597 66,388
December 627 7,243 17,284 7,751 6,955 5,560 21,789 63,870
2008
June 2009 627 7,323 20,434 7,751 6,691 5,576 21,789 70,461
December 627 7,381 20,437 7,751 6,961 5,766 21,952 70,875
2009
June 2010 627 7,415 20,487 7,751 6,961 5,866 22,002 71,109
December 1,050 7,415 20,487 7,751 6,961 5,866 23,052 72,582
2010
Area 1 Africa: Guinea
Area 2 North America: Canada, United States of America
Area 3 Latin America: Brazil, Guyana, Jamaica, Suriname, Venezuela
Area 4 East Asia: China*, Japan, South Korea*
Area 5 South Asia: Azerbaijan, India, Iran*, Kazakhstan, Turkey
Area 6A West Europe: France, Germany, Greece, Ireland, Italy, Spain
Area 6B East/Central Europe: Bosnia and Herzegovina*, Hungary, Romania*,
Russian Federation, Serbia and Montenegro, Ukraine
Area 7 Oceania: Australia
Note: An asterisk indicates that alumina annual production capacity data were
not reported to the IAI by the company or companies producing primary
aluminium solely within that country.

The major alumina refineries of the world are shown in table 3.6 along with their
capacities during 2004 and 2009. The biggest five refineries of Alumina are in Australia. All
refineries have increased their capacities in the last three years including NALCO, India. But
due to sharp fall in prices of alumina in later half of 2008;there were shutting down of
refineries in China and other parts of the world as well.

17
http://stats.world-aluminium.org/iai/stats_new/formServer.asp?form=4

12
 Table 3.6: Some of Major Alumina Refineries of the World18 (In million tons MT)
SN Plant Capacity(2009)
1. Queensland Alumina Refinery 3.954
(QAL), Australia
2. Pinjarra, Australia 4.200
3. Worsley, Australia 3.528
4. Wagerup, Australia 2.400
5. Shanx, China 2.250
6. Kwinana, Australia 2.150
7. Gove, Australia 3.600
8. Paranam, Surinam 2.200
9. Nalco, India 1.575
10. Corpus Christ, USA 1.400

Major global producer of alumina are listed in table 3.7 along with their number of
refineries, countries of operations, and capacities in million metric tonnes. The largest
Alumina producer is ALCOA with a capacity of 15.88 million tones followed by ALCAN and
CHALCO. Other majors are also in the process of increasing their production capacities. To
mention, (i) Yarwun Refinery19 near Gladstone, Queensland20 is progressing on budget and is
on track for its first shipment of alumina in the second half of 2010. The US$1.8 billion
project, announced in July 2007, will more than double annual production of the refinery,
taking output from 1.4 million tonnes to 3.4 million tonnes by 2011. The expansion also
includes a gas-based 160 MW cogeneration plant which will reduce CO2 emissions per tonne
of alumina by 35 per cent relative to coal, (ii) BHP21 plans $1.9 billion expansion to alumina
refinery in Western Australia. The expansion will raise annual capacity at the Worsley
Alumina refinery to 4.6 million metric tons from 3.5 million metric tons; (iii) Hindalco's
alumina22 plant expansion is on track. The alumina capacity at Muri is being raised from
110,000 tonnes per annum to 500,000 tonnes per annum. The company has also begun
evaluation work for expanding the Belgaum refinery from 350,000 tonnes per annum to
650,000 tonnes per annum and that of high value special alumina capacity at Belgaum to
167,000 tonnes per annum from 91,000.

19
http://www.riotinto.com/media/5157_7592.asp
20
http://www.theage.com.au/news/business/rio-to-spend-2bn-on-alumina-
expansion/2007/07/03/1183351209407.html
21
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080501id=8570446
22
http://www.projectsmonitor.com/detailnews.asp?newsid=9169

13
 Table 3.7: Global Producers of Alumina23
COMPANY No. of Countries located Capacities (in
Refinery Million Tonnes)
ALCOA 08 Australia, Brazil, Jamaica, 15.8824
Spain, Surinam, US
ALCAN 07 Switzerland, United 4.5
Kingdom, USA
CHALCO 04 China 4.2
(CHINA)
BHPBILLITON 03 Australia, Brazil, 4.1
Mozambique
GLENCORE 04 Ireland, Italy, Jamaica, 2.9
Sweden, USA
KAISER 03 Australia, Ghana, Jamaica, 2.8
UK
RUSAL, 03 Romania, Russia, Ukraine 2.0
RUSSIA
PECHINEY 03 Vietnam, France 1.8
CVG 01 Venezuela 1.8
VENEZUELA
RIOTINTO 03 Australia, Italy, New 1.7
Zealand
SUAL RUSSIA 02 Russia 1.6
NALCO INDIA 01 India 1.58

3.3.1. Demand & Price of Alumina:

The demand and price of alumina more or less follow the trend of the metal in the
international market. Being the base metal for producing Aluminium, its demand is directly
linked to the demand of the aluminium in the market. The new alumina production capacity
creation is an indication that its demand is to increase in days to come. Some location trends
are listed in the tables 3.8 and 3.9. It is evident from table 3.8 that its demand is increasing in
China, America and other part of the world. Secondly demand & prices are both increasing
over the last three year with variation during the years.

Table 3.8: Trends in demand of Alumina

Year Trend in demand of Alumina
2006 China’s demand for alumina in 2006 will decline and import 7.15
million tones of alumina with a growth of 3.6% only.
2007 According to Xiao Yaqing, chairman and CEO of Chalco25, China’s

23
http://en.wikipedia.org/wiki/List_of_Alumina_Refineries
24
http://www.alcoa.com/alumina/en/info_page/refineries.asp

14
 demand for alumina -- the chief raw material used in the smelting of
finished aluminum -- will rise 40% this year to around 12.2 million tons
during the year 2007-08.
01.07.07: The global bauxite26 and alumina market is projected to reach
251 million metric tons (mt) by 2010.
2008 22.04.08: (i) Market conditions for aluminum extrusion ingot27 in
Europe are expected to remain steady in 2008, although there will be
slightly weaker demand especially from the construction sector.
(ii) The U.S. market for aluminum extrusion ingots in 2008 is expected
to be slightly below 2007 levels, mainly due to continued weak demand
from the residential building and construction sector.
(iii) For aluminum sheet ingot in Europe, the expected demand outlook
remains positive although some slowing is possible in the second half of
2008.
(iv) Demand for aluminum foundry alloys in Europe is expected to
stabilize for the rest of the year, with a slight trend towards increased
market demand.

Table 3.9: Trend in Prices of Alumina

Year Trends in Prices of Alumina
2006 20.03.06: Alumina price reached28 670 - 690 US$/t on spot-fob basis in
March
03.08.06: The world spot price for alumina29, the key ingredient
smelted into aluminum, is $650/metric ton these days because of tight
supply. However, research analyst Daniel Roling at Merrill Lynch sees
transaction prices beginning a decline next year—and expects spot
prices will get closer in 2007 to the current contract price of $350
2007 22.03.07: Aluminum30 Corp of China Ltd, China's largest maker of
aluminum and alumina, raised its alumina spot price by 8.3 percent to
US$505 per tonne.
31.07.07: Alumina31 prices are staying at the level of ~ US$ 350/mt for
some time now.
06.11.07: According to CR Pradhan, CMD, Nalco, said alumina prices
are down at USD 300 per tonne as against USD 500 per tonne last
year32
2008 30.01.08: Shandong33 producers cut alumina spot prices by 6.7% to
$583.17 per tonnes.
25
http://www.chinamining.org/News/2007-08-21/1187679967d6771.html
26
http://www.encyclopedia.com/doc/1P3-1330805621.html
27
http://www.zibb.com/article/3097999/DJ+Europe+Aluminum+Extrusions+Demand+Weaker +In+2008+-
Norsk+Hydro?expired=2452638
28
http://www.alunet.net/shownews.asp?ID=1957&type=1
29
http://www.purchasing.com/article/CA6314079.html
30
http://www.chinadaily.com.cn/bizchina/2007-03/22/content_833842.htm
31
http://www.hindalco.com/media/press_releases/200707july/hindalco_Q1FY08_results.htm
32
http://www.china.org.cn/english/business/236222.htm

15
 11.01.08: Ten non-Chalco alumina producers jointly raised their spot
prices for alumina to $624.83 per tonne from $583.17 per tonne.
04.06.08: Chalco34 cuts alumina Price By 17%- It has lowered prices
to CNY3,500 a metric ton from CNY4,200/ton

In 2008, the spot alumina price averaged around US$340/t (i.e. 12.9% of LME 3M
Official Prices), but had fallen to less than US$180/tonne in February’09. Falling demand for
aluminium and its impact on production has reduced consumption of alumina and increased its
availability. The drastic reductions in prices have forced the high cost refineries to close down
or go for production cuts. The production curtailments supported by the increased buying by
Chinese smelters due to China’s State Reserve Bureau Stockpiling activities have supported
the spot alumina prices which are now (June’09) trading in range of $215-225/t fob Australia.
Australian commodities predict alumina spot prices to be around $179 / MT in 2009. It is
expected that alumina prices will begin recovering in 2010 as demand for aluminium is
expected to stabilize and production increases streamlined. Analysts forecast alumina prices to
rise, albeit at a slower rate than aluminium prices. A number of new refineries and capacity
expansions in China, Brazil, India and Eastern Europe are also expected to be completed over
the medium term(4-5years).

3.4. Aluminium

All modern primary aluminium smelters are based on Hall-Heroult process invented in 1886.
Typical Smelters produce 125,000 tonnes aluminium annually. New generation Smelters are in
the range of 350,000 to 400,000 tonnes. Aluminium making is a highly energy intensive
process. Design and process improvements have reduced electricity consumption from 21,000
kWh to 14,834 kWh for making one tonne of metal. Approximately 120 primary Smelters
around the world account for 90 per cent of the aluminium production. In China there are
about 118 Smelters producing around 7.6 million tonnes of aluminium. Historically the levels
of production, consumption and to a limited extent affect on aluminium prices by the
speculation in the commodity markets. The region wise primary aluminium production for the
year 2001 to 2008 is presented in table 3.10. North America produces maximum aluminium
that is about 22.75% followed by East/ Central Europe and West Europe. However, Oceania is
the largest producer of Alumina. It means Alumina moves to Europe and North America for
its conversion to Aluminium.

33
http://www.chinamining.org/News/2008-01-30/1201659304d8958.html
34
http://www.aluminiumleader.com/en/serious/news/2008/06/04/Chalcocutsprice

16
 Table 3.10: Primary aluminium production 35(In million metric Tonnes)
SN Regions\Years 2001 2002 2003 2004 2005 2006 2007 2008
1. Africa 1.369 1.372 1.428 1.711 1.753 1.864 1.815 1.715
2. North America 5.222 5.413 5.495 5.110 5.382 5.333 5.643 5.783
3. Latin America 1.991 2.230 2.275 2.356 2.391 2.493 2.558 2.660
4. Asia 2.234 2.261 2.475 2.735 3.139 3.493 3.706 3.923
5. West Europe 3.885 3.928 4.068 4.295 4.352 4.182 4.306 4.618
6. East/Central 3.728 3.825 3.996 4.139 4.194 4.230 4.460 4.658
Europe
7. Oceania 2.122 2.170 2.198 2.246 2.252 2.274 2.315 2.297
Total 20.551 21.199 21.935 22.595 23.463 23.869 24.803 25.654

Table 3.11 presents the aluminium production capacities in different regions from 2001 to
2008. It can be inferred from the data given in the table that North America and Western
Europe has created aluminium production capacities. It could be due to less energy cost in
these regions. The maximum capacities are available in North America followed by West
Europe and East/Central Europe.

Table 3.11: Primary aluminium production capacity36 (In million metric tonnes)
SN Regions 2001 2002 2003 2004 2005 2006 2007 2008
\Years
1. Africa 1.541 1.543 1.595 2.039 2.091 2.116 2.114 2.020
2. North 7.158 6.999 6.986 6.727 6.795 6.629 6.584 6.606
America
3. Latin 2.204 2.312 2.325 2..373 2.412 2.541 2.708 2.742
America
4. Asia 2.316 2.391 2.623 2.802 3.492 3.603 3.713 4.218
5. West Europe 3.933 3.993 4.185 4.352 4.356 4.429 4.567 4.769
6. East/Central 3.741 3.860 3.912 4.100 4.163 4.220 4.449 4.675
Europe
7. Oceania 2.100 2.115 2.193 2.256 2.269 2.278 2.308 2.351
Total 22.993 23.213 23.819 24.649 25.578 25.816 26.443 27.381

Note : The figures in table 3.10 and 3.11 are as per data reported to IAI. Thus the data of
China,North Korea etc are not included.

35
http://stats.world-aluminium.org/iai/stats_new/historical.asp?currentYear=2007&material=1
&formType=1&dataType=1&period=4&fromYear=2001&fromMonth=1&toYear=&toMonth=1&area=&submitSea
rch=Find+Stats
36
http://stats.world-aluminium.org/iai/stats_new/historical.asp?currentYear=2007&material=1
&formType=2&dataType=122&period=4&fromYear=2001&fromMonth=1&toYear=&toMonth=1&area=&submit
Search=Find+Stats

17
 3.4.1. Inputs/ Raw Materials

3.4.1.1. Electricity

Electricity is a key input for aluminium industry accounting for 30 per cent or more of the cost
of production. Therefore the reliability of the source of electricity and cost of supply
influences the production and price of aluminium. According to 2004 statistics, out of 277,917
Giga watt of power (GWH) consumed by the aluminium industry world wide only 29.2 per
cent came from industry’s captive sources. The pattern of sourcing of power is indicated in the
following table 3.12 and Table 2.13.

Table 3.12: Energy Sources of Electrical Power & Electrical Power Used (Giga watt hours)
Years Energy Africa North Latin Asia Europe Oceania World % age
Source America America Total of
World
Total
2004 Hydro 7,789 52,757 31,063 4,055 32,205 8,066 135,935 48.91
Coal 14,924 25,982 1,318 11,062 18,963 27,102 99,351 35.75
Oil 12 166 527 453 1,254 12 2,424 8.72
Natural 39 352 1,172 17,987 6,405 6 25,961 9.39
Gas
Nuclear 208 800 100 5 13,126 7 14,296 5.12
Total 20,501 71,482 30,520 29,963 64,246 31,401 277,917 100
200537 Hydro 5,808 55,429 33,195 3,868 88,228 7,659 194,187 57.3
Coal 17,992 23,702 0 14,182 13,840 25,618 95,334 28.1
Oil 0 4 0 599 1,722 2 2,327 0.7
Natural 76 233 1,412 21,572 6,704 0 29,997 8.8
Gas
Nuclear 951 473 0 0 15,697 0 17,121 5.1
Total 24,827 79,841 34,607 40,221 126,191 33,279 338,966 100
200638 Hydro 6,906 59,483 29,487 4,956 52,088 7,571 157,491 51.1
Coal 19,878 20,747 0 17,518 17,732 26,171 102,046 33.1
Oil 0 7 0 2,145 965 2 3,119 1
Natural 82 286 1,404 22,119 7,124 0 31,015 10.1
Gas
Nuclear 404 436 0 0 13,491 0 14,331 4.7
Total 27,270 77,959 30,891 46,738 91,400 33,744 308,002 100

The data given in table 2.13 is a proof for improvement in technology for producing
aluminium. The power consumption has reduced in 2006 in comparison to 2005.

37
http://stats.world- aluminium.org/iai/stats_new/historical.asp?currentYear=2007&material=1&
formType=4&dataType=&period=4&fromYear=2005&fromMonth=1&toYear=&toMonth=1&area=&submitSearch
=Find+Stats
38
http://stats.world-aluminium.org/iai/stats_new/formServer.asp?form=7

18
 Remarks: Analysts estimate39 that up to 45 percent of aluminium smelting costs — at around
$2,600 a tonne — are accounted for by power, prices of which have been rising around the
world.

Table 3.13: Electrical Power used per Metric Ton of Primary Aluminium Produced
(Kilowatt Hours)
Years Africa North Latin Asia Europe Oceania World
America America Weighted
Average
2004 14,617 14,896 14,969 15,079 14,952 14,495 14,834
2005 14,158 15,552 15,152 15,082 15,536 14,763 15,258
2006 14,622 15,452 15,030 15,103 15,387 14,854 15,194

The detail of other inputs along with complete process of converting bauxite in to Aluminium
is given in the following picture. (Contribution from remelt or recycled aluminium (Cold
Metal) is excluded as not representative for primary aluminium).

Fig 3.1: Process & inputs of Aluminium production process

39
http://www.dailytimes.com.pk/default.asp?page=2008\07\06\story_6-7-2008_pg5_21

19
 According to another set of statistics as reported in the literature, inputs for alumina and
aluminium are as given in table 3.14. These input materials traded world wide and have direct
implications on the cost of aluminium.

Table 3.14: Other Input to produce one tonne of Alumina and Aluminium
Product Input Quantity
Alumina Caustic Soda 75 kg
Lime 48 kg
Aluminium CP Coke 408 kg
CT Pitch 106 Kg
Fuel Oil 94 Kg
Aluminium fluoride 26 kg

3.4.2. Demand & Price of Aluminium

Global aluminium40 demand is likely to grow faster than GDP growth and total around
90 million metric tons by 2025, says McKinsey & Company. This is more than double demand
in '07 and +20% higher than market consensus, McKinsey notes. Some facts about demand
and prices are discussed in the following.

40
http://www.aluminiumleader.com/en/serious/news/2008/06/02/McKinseyreport

20
 Table 3.15: Trends in Demand of Aluminium
Year Trends in demand
2006 29.05.06: Aluminium consumption of 2006 will be 49 million tonnes.
2007 11.12.07: As per UBS41 aluminium could be the strongest performer among
the base metals. There is another possibility about China to turn in to net
importer due to export taxes.
26.03.07: Huge demand for aluminium42 across Europe.
2008 23.01.08: Global demand for aluminum43 this year is projected to increase by
9.6 percent to 41.7 million tons, with China topping the consumption at 14.9
million tons, and the US coming next at 6.8 million tons
11.04.08: Chinese Aluminium demand during 200844 will be about 14.9
million tons, a 24% higher than 2007. The country will account for 35% of
total demand by 2020 from 13% in 2000. Reason: Aluminium price is rising
because of a supply shortage. High demand growth for primary alumina in
China will be a key support for prices going forward. The reason of scarcity
of Aluminium in China is of snowstorms in China in 2008.
The Norwegian aluminum company said that global primary metal
consumption and production, excluding in China, is expected to grow by
about 2% and 6% respectively, from 2007 to 2008.
12.12.08 : Chineese demand for primary aluminium is forecast to continue to
increase next year despite the global downturn,although at very much reduced
rate in comparison with demand last year.Accordingly the Chineese state
owned research group Antaike,the country’s consumption of metal will rise
by 3% in 2009.

Main demand drivers will be infrastructure and business construction in developing

economies, particularly in China, but also in other emerging regions, such as India and the
Middle East.

The LME cash settlement prices touched a high of $3291.50/t on 11th July’08. However, during
July’08 the sub-prime mortgage crisis surfaced in US which gradually turned into a global
financial and economic crisis. The financial crisis and economic downturn affected the
Aluminium end-use sector markets (namely Building & Construction, Automobiles, Castings
etc.)

The global financial meltdown has affected all sectors of the economy. The base metal prices
have plummeted to multi year lows due to sharp drop in demand. The aluminium prices have
fallen more than 60% from a high of $3291.5/t in 11 July 08 to $1253.50 /t on 24 Feb.09. The
decline in prices has seen major producers like Alcoa reporting huge losses. Though the
producers worldwide has taken swift action for curtailing the capacity of high cost smelters, still
huge surplus of metal is available in the market. However, the prices have started to pick-up
from April’09 stabilising at around$1400/t and during June’09 it rallied around $1600/t. The

41
http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=41800&sn=Detail
42
http://www.free-press-release.com/news/200703/1174893370.html
43
http://industrysynthesis.com/2008/01/23/aluminum-and-steel.aspx
44
http://www.reuters.com/article/pressRelease/idUS71565+11-Apr-2008+BW20080411

21
increase in prices in LME is due to weakness in dollar, Chinese State Reserve Bureau stockpiling
activities and significant production cuts by different smelters. But analysts believe the present
rally in the LME prices is short lived as the fundamentals of aluminium are still very weak and
the stocks at the three commodity exchanges LME, NYMEX & SHFE have been increasing. The
stocks at the LME exchange has increased from 1.126 million tonnes as on 31st July’08 to 4.4
million tonnes as 30th June’09 an increase by 3.274 million tonnes i.e. by a phenomenal 291%.

AVERAGE LME PRICES OF ALUMINIUM OF LAST TEN YEARS

3000

2500
LME PRICE IN USD

2000

1500 Series1

1000

500

0
1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
98 99 00 01 02 03 04 05 06 07 08 09

3.5. Environmental Challenges

Various segments of aluminium industry have to deal with critical environmental issues.
Bauxite mines are required to restore the land and vegetation and make the land productive to
the local communities. Alumina refineries are concerned with the disposal/use of caustic soda
contaminated red mud which is generated nearly equal in quantity to the quantity of alumina
produced. Smelters face serious criticism for fluoride (PFC) emissions.

The Aluminium Industry is continually seeking to reduce energy consumption and

emissions through more efficient production and recycling processes. A great deal of R&D
efforts is directed in these directions. For example PFC emissions per tonne of aluminium
have diminished by 47% between 1990 and 1997. Energy consumption per tonne of
production has fallen by 70% over the past hundred years.

The industry strongly advocates for the use of aluminium in automobiles which has the
potential to save up to 20 metric tonnes of CO2 equivalents for each tonne of additional
automotive aluminium products used, due to enhanced fuel efficiency over the vehicle’s
lifetime. Use of Aluminium in Railways will also have positive impact from the above point of

22
 view. Similarly use of Aluminium in construction sector will also reduce use of wood and
related products thereby influencing the environment to a great extent.

3.6. Emerging Trends

i. Automobile, packaging and construction sectors will be key drivers of growth for
Aluminium industry in future.

ii. High consumption will be witnessed by China, Taiwan, Korea, Middle East, and
India because of increased investments in infrastructure sector and expected
growth in automobile, construction and consumer durables.

iii. Additions of new capacities of aluminium are expected to contribute the growth
on world production. Nearly 1.7 Million MT alone may be added in India in next
4 to 5 years.

iv. Production of primary aluminium will increase in Middle East, South America
and Africa on account of competitive energy cost.

v. Recycling of aluminium will receive increased attention in the developed and

developing countries for environment and cost reasons. Also because, a lot of
aluminium will be available for recycling.(The life cycle of aluminium being 40
years)

vi. Long periods of low prices on account of over production will lead to
consolidation through upstream and down stream integrations and innovations in
manufacturing processes for cost reduction.

vii. China has reached a stage of self-sufficiency in Aluminium. As a result many

small Smelters with obsolete technology and with high production costs have
closed their operations. The rising alumina and power cost have forced smaller
smelters in China to shut down. However, analysts feel that this self-sufficiency
could end within two or three years making China an importer of Aluminium.

viii. The global45 aluminium business is as dynamic as ever, with world production
rising in 2007 to over 38m tonnes and consumption 37.7m tonnes.
The global production in 2008 was 39.9m tonnes against consumption of 37.7 m
tones.
According to CRU forecast the production and consumption in 2009 would be
37.5 mt and 36.0 mt respectively.

ix. Due to Global meltdown leading to decline in LME prices the New Smelters
planned in Middle-East, Latin America and Europe have been deferred.

45
http://www.metalbulletin.com/events/Details/Intro.aspx?EventID=575

23
x. ALCOA INC forecast a further 7% contraction in world aluminium demand in
2009 with most decline occurring in western countries.

xi. NORSK HYDRO sees 10-15% fall in consumer demand for aluminium in 2009.

xii. ALCAN expects aluminium demand to fall by 12% in 2009 to 33.5 million tons
due to housing and car slump.But by 2010 there will be recovery of industrial
production which would help Aluminium prices.

xiii. In Aluminium there is overcapacity & stock overhang.Even with a fairly strong
rebound in demand forecast for 2010,still surplus is expected to persist.In
2011,the aluminium market may return to normal.Analysts estimate low growth in
base metal in Q2,09.

24
 CHAPTER-IV

GLOBAL ALUMINIUM MAJORS

4.1. Introduction

This chapter discusses the major activities, strengths, and turnover of the global Aluminum
majors such as Alcoa, Alcan Inc., Rusal, ALCAN - Pechiney Co Ltd .(Formerly known as
Pechiney Ltd) and others.

4.2. Alcoa46

Alcoa headquartered in USA is the largest integrated producer of primary aluminium,

fabricated aluminium and alumina in the world. Alcoa is the world’s third largest producer of
aluminium, behind Rio Tinto and RUSAL. From its headquarters in Pittsburgh, Pennsylvania,
Alcoa conducts operations in 44 countries. In addition to aluminium products, Alcoa alos
makes and markets consumer brands including Reynolds Wrap foil and plastic wrap, Baco
household wraps, and Alcoa wheels. Among Alcoa’s other businesses are closures, fastening
systems, building products (Kawneer), Howmet Castings, and electrical distribution systems
of cars. Alcoa produces about 13.9 million tonnes of alumina. It has a primary aluminium
capacity of 4.21 million tonnes and has access to another million tonnes from its affiliates .It is
also active in technology development. Alcoa has long term contracts with all major aerospace
companies for aluminium alloy extrusions. It has a dominant position in rolled products. In
production of body stocks for transportation industry the company is positioned as the lowest
cost converter. Alcoa operates in 44 countries with 1, 07,000 employees (Q1 of 2008). Its
turnover was 30.7 billion dollars in 2007. Its net income was US $ 2.564 billions (2007).

Vision: To be the best company in the world.

Strategic Goal: To be one of the worlds’ best performing industrial companies – as measured
in social and environmental responsibility, employee choice and financial performance; as
measured in superior return on capital, growth in sales and growth in earnings per share.

4.3. Alcan Inc.

Alcan47 is a multinational, market-driven company and a global leader in aluminum and

packaging. With world-class operations in primary aluminum, fabricated aluminum as well as
flexible and specialty packaging, aerospace applications, bauxite mining and alumina
processing, today’s Alcan is well positioned to meet and exceed its customers' needs for
innovative solutions and service. Alcan employs almost 68,000 people, including its joint
46
www.alcoa.com
47
http://www.alcan.com/web/publishing.nsf/Content/About+Alcan+-+Company+Structure

25
 ventures, and has operating facilities in 61 countries and regions. It is a highly competitive
producer of primary aluminium and a global force in aluminium fabrication and flexible
packaging. Through customer partnerships, the Company provides innovative solutions in
automotive and transportation sector. Alcan is also major player in wire rods and aluminium
powder markets.

The organization is aimed at best serving the interests and needs of global and regional
customers in all aspects of the aluminum, fabrication and packaging markets while delivering
maximum value to the Company’s shareholders. The structure reflects Alcan’s international
scale with major decision-making centers located both in Europe and North America.

Alcan maintains a corporate head office in Montreal, Canada, which focuses on corporate
strategy and growth initiatives, human resources and strategic capital allocation, corporate
governance and compliance functions. Alcan also has its global business group headquarters in
Montreal and Paris. Alcan is a public company traded on the Toronto, New York, London,
Paris and Swiss stock exchanges48 with 2006 revenues of $23.6 billion..

In 2006, Alcan produced about 5,285 thousand tonnes of alumina49 out of 8 alumina refineries
located in different parts of the world. Alcan owns or has interest in 22 Smelters in 11
countries/ regions with a total capacity of 3.468 million tonnes per annum. Its primary metal
unit has 55 production facilities in 21 countries and regions and employ 16,000 employees.

In the recent past Alcan has acquired Alusuisse of Switzerland and Aluminium Pechiney of
France to be come one of the large Aluminium Company.

Strategic Goal: To position Alcan as the global partner of choice in both Aluminium and
packaging etc. maintain profitable growth momentum to maximize shareholders’ value.

4.4. United Company RUSAL50

UC RUSAL is the global leader in aluminium industry, accounting for approximately 12% and
15% of global production of aluminium and alumina respectively. The company was founded
in March 2007 through the merger of RUSAL, SUAL, and Alumina assets of Glencore. UC
RUSAL sells its products in 70 countries worldwide and employs 100,000 people in 19
countries, across 5 continents. In Nigeria UC RUSAL is represented by the ALSCON
aluminium smelter. 15 aluminium smelters, 14 alumina refineries, 8 bauxite mines (4 mines
are integrated with alumina refineries), 1 nepheline mine, 1 limestone mine, 1 quartzite mine
and 3 foil mills makes the assets of UC RUSAL.

RUSAL: Strength in primary aluminium production, access to vast energy resources and
development of advanced technology.

48
http://www.alcan.com/web/publishing.nsf/content/About+Alcan+Home
49
http://www.alcan.com/web/publishing.nsf/Content/About+Alcan+-
+Publications/$file/Alcan+Facts+2006+English+Web.pdf
50
www.rusal.com

26
SUAL: Strength in excess alumina refining capacity in the Urals.

Glencore: International spread of high quality alumina assets.

Technology & capabilities: United Company RUSAL has its own R&D and engineering
capabilities and owns the RA-300 and RA-400 technologies. Every day, United Company
RUSAL mines and produces:

o 11,500 tonnes of aluminium;

o 31,000 tonnes of alumina;
o 53,000 tonnes of bauxite;
o 197 tonnes of foil.

Vision: Building upon the position of global leader in one commodity to become a leader in
metals and mining industry.

Strategy: UC RUSAL’s strategy aims to secure steady and sustainable business development
by maximizing the potential of the corporation’s present competitive advantages and
examining and responding to major world trends. Today, diversification and consolidation are
decisive factors determining success in the international mining and metals industry and UC
RUSAL is responding accordingly.

Goal: The goal of RUSAL is to become the largest and most efficient aluminium company in
the world.

Investment Projects: Creation of the United Company allowed to use extra financial
capacities and resources to develop assets that it comprises and to implement new investment
projects. The main goal is to upgrade, to introduce state-of-the-art production practices and to
look for new opportunities for development as an energy and metals company. Investment
projects of the United Company are aimed at securing raw materials supply, creating own
power-generating facilities, increasing the production of aluminium and improving
environmental indices thanks to the introduction of modern technology.

4.5. ALCAN - Pechiney Co Ltd (Formerly known as Pechiney Ltd)

Pechiney, a France based corporation was world’s fourth largest producer and converter of
aluminium prior to its acquisition by M/s Alcan in 2003. Pechiney has presence in all facets of
alumina & aluminium production and is diversified into Ferro alloys, plastic packaging and
international trading. Pechiney is Europe’s leading aluminium converter for transport,
construction, household appliances and packaging applications. It was employs 34,000 persons
and has 334 manufacturing and sales facilities in 51 countries. The total sales turnover is 11.0
billion Euros.

27
 4.6. BHP51 Billiton:

It was created in 2001 by the merger of Australia’s Broken Hill Proprietary Company (BHP)
and UK’s Billiton, which had a South African background. The company operates a wide
variety of mining and processing operations in 25 countries, employing 38,000 people. The
company has primary operational units: Iron Ore, Manganese, Petroleum, Aluminium, Base
Metals (primary products include copper, lead, zinc and uranium), metallurgical coal, thermal
coal, stainless steel materials (nickel and cobalt), diamonds & specialty products (diamonds &
titanium minerals). Its headquarters are in Melbourne, Australia. Its operating income is $
18.401 billion (2007). According to SMH (2007), The Sydney Morning Herald, its total
revenue for 2007 was $ 149.498 billion. The BHP Billiton is the fourth largest producer of
primary aluminium, with a total operating capacity of 1.3 million tonnes of aluminium,
approximately 14 million tonnes of bauxite and 4.5 million tonnes of alumina per annum.

Vision: “To be a company of choice-creating sustainable value for shareholders, employees,

contractors, suppliers, customers, business partners and host communities”.

Objectives: The group’s objective is to be the company of choice, by creating sustainable

value for all our stakeholders. Achieving this objective requires us to recruit, develop and
retain talented and motivated employees who share our company’s vision and values.

Strategy: Our strategy is to own long life, low cost, export –oriented, expendable assets.

Assets: BHP Billiton is a diversified, global resources company with more than 100 assets,
operations and officers in over 25 countries.

4.7. Aluminium Corporation of China Limited (CHALCO)52

Aluminum Corporation of China (CHINALCO), an investment management and holding

company authorized by the state, is a backbone state-owned enterprise under direct
administration of the central government. As of the end of 2007, its total assets have reached
over RMB 200 billion, with its value growth rate of value retention on fixed assets and return
on equity leading among the state-owned enterprises with total assets over RMB 100 billion. It
is the world’s second largest alumina producer and the third largest primary aluminum
producer. With Chinalco being the holding company, Aluminum Corporation of China
Limited (CHALCO) is listed on the Hong Kong, New York and Shanghai stock exchanges.
CHALCO is rated BBB+ by Standard & Poor’s for three years.

CHALCO owns 10 branches, 1 research institute, and 12 subsidiaries (Companies held under
it). Its total employee’s strength is 86, 200 (2006).

51
www.bhpbilliton.com
52
www.chinalco.com

28
 4.8. Rio Tinto

Rio Tinto53 is a leading international mining group headquartered in the UK, combining Rio
Tinto plc, a public company listed on the London Stock Exchange, and Rio Tinto Limited,
which is listed on the Australian Securities Exchange with executive office in Melbourne. The
two companies are joined in a dual listed companies (DLC) structure as a single economic
entity, called the Rio Tinto Group. The Group finds, mines and processes the earth's mineral
resources - metals and minerals essential for making thousands of everyday products that meet
society's needs and contribute to improved living standards. Its headquarters are London, UK
and Melbourne, Australia.

The Group's major products include aluminium, copper, diamonds, energy products, gold,
industrial minerals (borates, titanium dioxide, salt and talc), and iron ore. Its total revenue
during 2007 was $127.700 billion. Operating income was $8.571 billion (2007). Its employee
strenghth is 35,000 (2007).

Strategy
Rio Tinto’s fundamental objective is to maximise profit to investors by operating responsibly
and sustainably in finding, mining and processing minerals – areas of expertise in which the
Group has a competitive advantage. Our strategy is to invest in large, long life and cost
competitive mines driven by the quality of opportunity, not choice of commodity.

Alcan Inc. (Alcan ) joined Rio Tinto Group on 23rd October 2007. The total cost of the
acquisition amounted to US $ 38.7 Billion, including fees. The expanded product group,
formed by the combination of Alcan and Rio Tinto’s existing aluminium assets, was
renamed as Rio Tinto Alcan (RTA).

53
www.riotinto.com

29
 CHAPTER-V

INDIAN ALUMINIUM INDUSTRY

5.1. Introduction

India had made a low key entry into aluminium arena with the commissioning of a 2500 TPY
smelter by INDAL (then an ALCAN venture) in 1943. However, only after 1960, the country
witnessed significant developments in aluminium production capabilities. HINDALCO came
into operation in 1962. BALCO in the public sector was commissioned in 1975. However the
situation of deficit with regular import of aluminium had continued till National Aluminium
Co. Ltd. (Nalco) came into operation in 1987. Nalco initiated export of alumina and
aluminium from India for the 1st time in 1988. Since then India has not only maintained its
presence in the global aluminium trade but is also attracting various investment proposals from
multi-nationals to exploit country’s large bauxite reserves, estimated to be 3035 million
tonnes. The available alumina, aluminium and captive power capacities of National
Aluminium Company (NALCO), Hindalco Industries Limited (HINDALCO), Bharat
Aluminium Company Ltd (BALCO), and Madras Aluminium Company Ltd (MALCO) for the
year 2004-05 to 2007-08 are presented in table 5.1.

Table 5.1: Available Alumina, Aluminium and Captive Power capacities 54

Year Alumina(Million MT) Aluminium(Million MT) Power(MW)
NALCO 1.575 0. 345 960
HINDALCO 1.130 0.424 1021
2004-05 BALCO 0.200 0.100 270
MALCO 0.065 0.035 75
TOTAL 2.970 0.909 2326

NALCO 1.575 0.345 960

HINDALCO 1.145 0.462 1021
2005-06 BALCO 0.200 0.100 270
MALCO 0.080 0.035 75
TOTAL 3.000 0.943 2326

NALCO 1.575 0.345 960

HINDALCO 1.160 0.489 1087.2
BALCO 0.200 0.350 810
2006-07
MALCO 0.085 0.035 75
2932.2
TOTAL 3.020 1.224

54
http://www.indiastat.com/india/ShowData.asp?secid=183&ptid=23&level=2

30
 Alumina(Million MT) Aluminium(Million MT) Power(MW)
NALCO 1.575 0.360 960
2007-08 HINDALCO 1.23 0.518 1109
BALCO 0.200 0.350 810
MALCO 0.12 0.035 75
TOTAL 3.125 1.263 2954

The backwardness of Indian aluminium industry is historically attributed to the price and
distribution controls and restrictions on import of technology and capital imposed by the Govt.
The industry remained highly dependent on the demand from electrical sector. While the
aluminium industry enjoyed confessional power tariff, subsidies and low taxation up to 1970,
the scenario dramatically changed in the next decade with sharp rises in power tariff and
excise duty, thereby retarding growth. Success of primary aluminium industry had become
untenable without captive power sources.

Removal of price and distribution control in 1989, de-licensing of aluminium industry in 1991
and the subsequent economic policy reforms aimed at competitive growth of corporates, have
helped to change the outlook of the Indian aluminium industry. The domestic aluminium
majors are now keenly pursuing brown field and green field expansion programmes along with
substantial increases in Captive Power generation. The Indian aluminium industry has become
forward looking. The liberalization policy introduced by the Government of India had its
impact on the Aluminium Industry of the country too. With introduction of reforms, the
industry saw consolidation & expansion in this area. Primary producers in India initiated their
expansion & capacity creation during the period coupled with De-bottlenecking &
modernization resulting in quantum jump of production of Aluminium from a level of 449,328
MT in 1990-91 to 880,331 MT in 2004-05. The projected capacity expansions over next 4 to 5
years are of the following order

Table 5.2: Projected Expansions (in Million MT)

Alumina Aluminium
From To From To
NALCO 1.575 2.100 0.345 0.460
BALCO 0.200 0.830 0.100 0.345
HINDALCO 1.130 1.800 0.424 0.510
VEDANTA* 1.40 2.000 0.25 1.600
TOTAL 4.305 6.730 1.119 2.915

*VEDANTA’s new green field alumina refinery at Lanjigarh, Orissa with technical
collaboration with Worley, Australia is partly commissioned.

5.2. Recycling

The world average of the use of recycled metal or secondary metal is about 30 per cent. In
some of the developed countries, this is as high as 50 per cent. In India this is not a well-

31
organised business. The only 25000 TPY recycling unit in corporate sector is owned by
INDAL and is utilized up to 50 percent only. However, it is estimated that about 80,000 tonnes
of aluminium scrap gets imported into the country for recycling. And about 40,000 tonnes of
scrap from domestic sources gets recycled in unorganised sectors, accounting for 17% of
domestic consumption. Since recycling process by-passes costly inputs and saves energy, this
route offers growth opportunities for downstream industries to enhance use and application of
aluminium in the country as well as to make value added exports.

5.3. Consumption Pattern

The per capita consumption of aluminium in India is as low as 0.7 kg. If the per capita
consumption increases even to a level of 1 kg, the demand of Aluminium metal shall exceed
domestic supply in India. The per capita consumption of Aluminium in world is 9 Kg. In the
developing economies it is 6 Kg and in developed nations it is 12 Kg. (Source metal world
March’ 2005).

In India the electrical sector accounts for about 31 percent aluminium consumption. Given the
poor state of electrification in the country and the planned investments in power generation
and distribution, this sector will continue to dominate aluminium consumption. But at the
same time, the transport and the construction sectors are expected to register substantial
growth in aluminium use. Availability of cheap substitute materials may however limit use of
aluminium in packaging and consumer durables in India.

Table 5.3: Aluminium Consumption: World and India (Figures in percentage)

Sector World Developed Countries India India (Projected)

Building & 19 21 8 10
construction
Transport 34 27 18 22
Packaging 20 22 6 7
Electrical 7 8 31 32
Consumer Durables 5 7 23 18
Machinery/Industry 9 8 10 8
Others 6 7 4 3

5.4. The Down Stream Scenario

The capacity and performance of downstream industries in India has not been well
documented, except where the primary producers and some of the major secondary producers
are in downstream operations. Primary producers having downstream production are in better
position to capitalize on value-addition compared to stand alone secondary producers who face
fluctuations in metal prices, high import duty on primary metal and lately, the entry of multi-
nationals in aluminium goods. The assessed capacities including those of small and
unorganised sector are estimated in the following table.

32
 Table 5.4: Sectoral Consumption (in Million Metric Tonnes)

Sectors Primary Producers Secondary Producers

Extrusions 0.0274 0.10665
Rolled Products 0.2673 0.0758
Wire Rods 0.1900 0.1750
Foils 0.0115 0.0480

NALCO has acquired International Aluminium Products Ltd. (IAPL), a company promoted by
M/s Mukand Ltd. in a partially completed condition in March 2000.The capacity of this
project is 50,000 TPY of various cold rolled products like sheets, coils, slugs and foils. This
unit has been commissioned in 2005-06 and is in the process of achieving the rated production
capacity.

HINDALCO’s output of down stream products, such as aluminium foils and sheets used as
roofing material was rose to 261,400 tonnes in 2008 from 245,000 tonnes last year.

Aluminium Castings which consumes up to 4,50,000 tonnes of aluminium is an area of low

technology and poor quality in India. But with growth in automotives, there is significant
scope for this segment among the downstream industries to look up with better technology and
advanced quality control measures.

The electrical conductor industry is estimated to have about 150,000 T capacities. This sector
being highly dependent on the financial health of Electricity Boards and other distribution
companies, the industry has lagged developments particularly in shifting to alloy conductors

On the whole much is desired to be done in the downstream sectors of Indian aluminium
industry.

5.5. The Domestic Players

The primary industry has both private and public sector players. In fact the public sector
companies i.e. Balco and Nalco accounted for more than 50 percent of primary production.
However, lately the scenario has changed. Balco has been taken over by Sterlite Group which
earlier owned Malco and India Foils. Now the only public sector player in the field is Nalco.
Hindalco who were having their own downstream facilities has acquired Indal and Annapurna
Foils to strengthen its value addition projects and the market presence. Among the
downstream majors India Foils has acquired Light Metal Industries. Nalco earlier an equity
partner in IAPL’s Rolled Products Project has taken over the unit and has commissioned the
unit. Thus there seems to be a number of synergetic polarizations in the domestic aluminium
industry in India, which may prove good for growth of the industry.

33
5.6. The Price Mechanism

India with as little as 2.7% of world consumption and 3% of world production has no
influence on international prices of aluminium. However, since 1994 the Indian primary
producers are using LME prices for reference while determining the domestic prices from time
to time. The domestic prices are fixed considering market scenario, demand-supply and
various other points. In alumina segment, Nalco now emerging with about one million tonne
exportable surplus, there is likely to play some role in the international alumina price
dynamics.
The excessive demand for Aluminium in China for its construction sector has resulted in high
growth for Aluminium consumption & it accounts for 22% of world consumption in 2004.
This has resulted in hardening of prices of Aluminium & its feed stock Alumina. This has led
to capacity creation for Aluminium at an uncontrollable rate. The smelting capacity in China
mushroomed due to low Alumina price, soft loans, low power prices & simulative trade
incentives. However with rising cost of production, some of the smelter have shutdown &
because of this the further upside of Alumina price may be capped. Volatility in Aluminium
prices may continue in coming 2-3 years.

5.7. Emerging Trends in India

i. Indian Aluminium industry has gradually become more outward looking and
adventurous with green field and brown field investment proposals and export
objectives.

ii. The recent acquisition and mergers within the industry will facilitate technology
up-gradations, new applications and product developments to match international
standards.

iii. Considering the anticipated recovery in the economy and planned investments in
infrastructure development, there will be growth impact on power, automobile
and construction sectors. The demand for aluminium in India is expected to grow
at the rate of 4-5% over next 5 years.

iv. For multi-national companies India is now a destination for setting up alumina
refining facilities and smelter with possible collaboration and partnership with
domestic players.

v. Import of finished/semi finished aluminium products will increase with

anticipated scale downs in tariffs.

vi. The demand for special grade alumina chemicals has been growing in the global
market. This would help to boost value addition projects in the downstream of
alumina refineries.

34
vii. Pollution and environment considerations will need increasing attention of the
industry on account of growing social activism in this area.

viii. The Mineral Policy of Govt. of India says that Bauxite to Alumina conversion has
lower power intensity and can therefore, be done in India, at more or less global
costs. However, Alumina to Aluminium is very power intensive. Thus, it is
logical to convert Bauxite to Alumina in India & allow Alumina to be exported
and made into Aluminium in a part of the world that has competitive cost of
power.

35
 CHAPTER-VI

NATIONAL ALUMINIUM COMPANY LIMITED (NALCO)

6.1. The Origin and Growth Profiles

Major discoveries of Bauxite in the East Coast region were made in 1975 and this coincided
with the interest shown by Iran & USSR in development of these deposits to produce Alumina
for export to their country. In July 1976, Govt. of India nominated BALCO as the Agency
responsible for the East Coast Bauxite operations from Bauxite to Alumina. Subsequently,
BALCO was advised to prepare detailed reports for the Alumina Plant, production of
Aluminium and setting up of a power plant for the project.

Based on various deliberations and discussions M/s Aluminium Pechiney, France (AP) was
awarded the work for preparation of a Feasibility report for an Integrated Aluminium Complex
in February 1978 for Orissa Aluminium Complex. M/s AP have submitted the Feasibility in
February 1979, based on which Govt. of India took a decision to Implement the project and
Nalco was incorporated in 1981. National Aluminium Company (NALCO) was incorporated
in the year 1981 as a public sector enterprise under the Ministry of Mines, Govt. of India, to
implement an integrated but multi-locational Bauxite-Alumina-Aluminium-Power project in
the State of Orissa. The technologies for mining, alumina refining and smelting were provided
by Aluminium Pechiney of France. These projects located in under developed areas, were
completed under very difficult logistics of project management without time and cost over
runs at a capital cost of Rs.2408 crores. The Company went into commercial operations in
1987-88 and started exports in the same year.

Table 6.1: The Initial Capacities and the Capital Costs Involved

Segment Capacity Capital Cost (Rs. Crs.)

Bauxite Mines, 24, 00,000 TPY 88.00
Panchpatmali
Alumina Plant, 8,00,000 TPY 754.00
Damanjodi
Aluminium Plant, Angul 2,18,000 TPY 723.00
Captive Power Plant, 600 MW 812.00
Angul
Port Facilities, Vizag For export of alumina and 31.00
import of caustic soda

Nalco, through these years has not only contributed to the self sufficiency of the country in
Aluminium, but also given the country the technology edge in producing this strategic metal
on world standards. With its consistent track record in capacity utilisation, technology
absorption, quality assurance, export performance, servicing of loans, internal resource

36
 generation and posting of profits, Nalco has chartered a course of international confidence in
India’s industrial capability.

6.2. Capacity Utilisation

The Company has achieved above 100% capacity utilization in Alumina Refining and Metal
Smelting. The capacity utilization patterns for last seven years ( 2000-01 to 2006-07) are given
in table 6.2 and table 6.3 below for Bauxite, Alumina, Aluminium and captive power plant.
The capacity utilization of bauxite mine and power generation are influenced by the
requirements of alumina refining and Smelter respectively.

Table 6.2: Bauxite & Alumina Segment (Figures are in Million MT)
*BAUXITE ALUMINA
Capacity Production Utilization Capacity Production Utilization
2000-01 4.800 2.834 59.04% 0.800 0.939 117.37%
2001-02 4.800 3.522 73.37% 1.031 1.113 107.95%
2002-03 4.800 4.777 99.52% 1.575 1.481 94%
2003-04 4.800 4.817 100.34% 1.575 1.550 98.41%
2004-05 4.800 4.852 101.07% 1.575 1.576 100%
2005-06 4.800 4.854 101.13% 1.575 1.590 100.95%
2006-07 4.800 4.623 96.31% 1.575 1.475 93.65%
2007-08 4.800 4.685 97.6% 1.575 1.575 100%
Pipeline 6.300 by - - 2.100 by - -
December December
2009-10 2009-10

Table 6.3: Smelter & Power Segment (Figures are in Million MT)

Year ALUMINIUM POWER

Capacity Production Utilization Capacity Generation PLF %
2000-01 0.230 0.231 100.22% 6X120 MW 3,833 (MU) 67.912
2001-02 0.230 0.232 100.7% 6X120 MW 3,970 (MU) 70.062
2002-03 0.230# 0.245 106.39% 7x120 MW 4,291 (MU) 75.15
2003-04 0.345 0.298* 86.43% 7x120 MW 5,122 (MU) 76.465
2004-05 0.345 0.338* 98.11% 8x120 MW 5,617 (MU) 74.765
2005-06 0.345 0.359 104.06% 8x120 MW 5,679 (MU) 75.67
2006-07 0.345 0.359 104.06% 8x120 MW 5,968 (MU) 79.32
2007-08 0.3485 0.360 103.29% 8x120MW 5,609(MU) 74.31
Pipeline 0.460 by - - 10x120MW -
2009-10 by 2009-10

*Note: The reduction in capacity utilization is because of the delay in commissioning of the 120
Pots of the 3rd Pot Line. # the addition of pots under 1st phase expansion commenced
during the year.

37
 Alumina Production

18

15.76 15.9 15.75

16 15.5
14.81 14.75

14

12
11.13
Lakh Tonnes

10 9.39

0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Year

Fig 6.1 : Alumina Production 2000 to 2008

38
 Metal Production

3.59 3.59 3.6

3.5 3.38

2.98
3

2.45
2.5 2.32
2.31
Lakh Tonnes

1.5

0.5

0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Year

Fig 6.2 : Aluminium Production 2000 to 2008

Captive Power Generation

7,000

6,000

5,000
Million Units (MU)

4,000
5,609
5,968
5,679
5,617

3,000
5,122
4,291
3,970
3,833

2,000

1,000

0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Year

Fig 6.3 : Captive Power Generation 2000 to 2008

39
6.3. Resource Generation & Application

The initial total capital cost of Rs. 2408 crores of Nalco was financed by Rs. 1119 crores
equivalent Euro-dollar commercial loan raised through a consortium of international banks
and Rs. 1289 crores coming from the Government of India Plan Funds, which included Rs.
156 crores equivalent French credit on plants and equipment purchased from France.

The company, with its profitable operations, generated internal surpluses and had also
proposed expansion of its basic production capacities in 1991. As the expansion projects were
not materialising, the Company judiciously used the funds to liquidate its overseas loans,
which had become Rs. 2652 crores in 1991-92 in rupee terms, by resorting to pre-payments in
most cases. This protected the Company against exchange rate variations and interest payment
to significant extents. Nalco reached zero debt status in 1998.

The huge equity base of Rs. 1288.62 crores, which was affecting financial ratios and limiting
dividend decision had also made the Company unattractive in the stock market. Accordingly
the equity capital was restructured in March 1999 by converting 50% of the equity into interest
bearing debt instruments. The dividend payment improved from 10% in 1997-98 to 60% in
2002-03. However, keeping the fund requirement for the expansion projects in view, dividend
has been paid at the rate of 40% for the year 2002-03 & 2003-04. The dividend has been
increased to 60% in 2007-08.

The Company also managed a number of capital intensive projects out of internal accruals in
the direction of higher power generation, debottlenecking and value-addition. Between 1992
and 1998, the following projects were implemented at a total cost of Rs. 445 crores.

• Expansion of Captive Power Plant from 600 MW to 720 MW.

• Debottlenecking of Smelter, thereby enhancing the metal production capacity from 2,
18,000 to 2,30,000.
• Creation of 26,000 TPY Billet Casting Facilities.
• Creation of 26,000 TPY Strip Casting Facilities.

Further to the above and subsequent to the Govt.’s approval, the Company undertook between
1996-2004 certain major expansion projects in phases and also added new facilities in the
downstream. These developments are indicated in the table below.

40
 Table 6.4: Capacity Expansions of NALCO
Units From To Cost Status
Bauxite Mine 24,00,000 48,00,000 Rs.80 cr. Completed in 1999
TPY TPY
Alumina Plant 8,00,000 15,75,000 Rs.1264.63cr. Completed in 2001
TPY TPY
Smelter Plant 2,30,000 3,45,000 Rs.1319.21cr. completed in 2004
TPY TPY
Power Plant 720 MW 960 MW Rs.900 cr. completed in 2004

The Company’s Port facilities at Vizag have also been expanded to store and handle high
volumes of bulk cargos.

In the downstream, the Company has added facilities for manufacturing 26,000 TPY Special
Alumina Chemicals and 10,000 TPY detergent grade Zeolite to-gather involving Rs.80.88
crores. In the metal sector NALCO has acquired International Aluminium Products Ltd.
(IAPL), in March 2000 having a 50,000 TPY capacity of various cold rolled products like
sheets, coils, slugs and foils.

The Company has managed to self-finance all the above investments to the extent of 90 per
cent of the expenditure committed. The Pattern of Resource Generation achieved during last
seven years is indicated in table 6.5. The comparative performance for the last two years is
given in table 6.6 along with targets.

Table 6.5: Pattern of Resource Generation (Rs. in crores) at NALCO

2008-09 2007-08 2006-07 2006-05 2004-05 2003-04
Total 5230.8 5474.45 6354.19 5082.60 4374.60 3324.84
Income
Operating 3703 2822 2412 2311 1965 1741
Expenses
Net Profit 1272.27 1631.52 2381.38 1562.20 1234.84 737.37
Depreciation 274.4 281.1 321.50 381.60 458.71 446.27
availed

Table 6.6: Comparative Physical Performance for the last two year of NALCO.
(All fig in MT except electricity which is in MU)
SN. Items 2008-09 2007-08 Target for
2008-09
1 Production
Bauxite 4700027 4684684 4900000
Alumina hydrate 1576500 1575500 1590000
Aluminium 365867 360457 355000

41
 Electricity 5541 5609 5640
2 Sales
Alnmina-export 851886 859943 850000
Hydrate& alumina- dom 21933 23195 15000
Aluminium -export 81936 100847 102000
Aluminium - dom 270071 251612 250000
Electricity 81 129 229
4 Internal consumption
Alumina 709146 699037 710000
Bus bar& anode stem 300 4642
Power 5460 5529
5 Closing stock
Alumina 52848 64260
Aluminium 9971 4488

Table 6.7: Cost of Raw Material Consumption at NALCO

Sno. Items Price per unit (in Rs.) % change Expenditure
2008-09 2007-08 in price 2008-09(Rs. In
crore )
1 Refinery
–caustic soda 16487 18240 -9.61 189.2
- lime 4696 4053 15.86 24.96
2 Smelter
– CP Coke 21130 13749 53.68 304.5
- CT Pitch 24953 21375 16.74 86.67
- Aluminium Fluoride 79828 57550 38.71 66.64
-Fuel Oil(HFO) 31955 20532 55.64 422.24
3 CPP
-Coal 1019 737 38.26 666.89

The cost of consumption of various inputs/ raw material is given for the last two years in table
6.7. There is an decrease in the productivity in 2009 over 2008.Average cost per employees
has also increased due to increase in perks(tale 6.8 given below).

Table 6.8: Employee’s Remuneration & Productivity at NALCO

SN. Particulars Units of For the For the year %
measurements year 2008- 2007-08
09
1 Average cost per Rs. Per month 72494 62162
employee 16.62
2 Staff cost to total % 18 19 -5.26
operating cost
3 Productivity per employee
Mines – Bauxite MT/employee 9198 9522 -3.40

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 Refinery- Alumina MT/employee 860 865
Hydrate -0.58
Smelter- Aluminium MT/employee 115.6 119
Metal -2.86
CPP – electricity MU/employee 3.81 3.89 -2.06

6.4. Technology & Patents

Nalco’s Smelter Plant is based on 180 KA cell technology of Pechiney and the Alumina
Refinery uses the Bayer process technology of atmospheric pressure digestion at low
temperature, also supplied by Pechiney. Through various technical assistance agreements with
Pechiney and in-house efforts, a large number of modifications and up gradations have been
implemented over the years to achieve better quality and economy. Nalco has got exclusive
rights on the above AP technologies for its use in India.

Nalco’s R&D centers at the alumina refinery and the smelter plant are recognized by the
DSIR; Govt. of India .The company also has got collaborations with RRLs, IITs, IISc, and
other specialized centers for various research projects. These efforts have resulted in the
following patents granted in favour of the company.

i. Process for precipitation of alumina hydrate with superior purity and fineness.

ii. Preparation of Low Soda, High Alpha, Thermally Reactive Alumina.

Also based on the R&D efforts Patent applications also have been filed for the following
processes and products in India and abroad.

i. Process for manufacturing of Zeolite –A (filed in India and abroad)

ii. Process for production of Light Alumina Hydrate.

iii. Process for Alumino-Silicate Zeolite type Na-P.

iv. Process for production of wear resistant ceramics using fly ash & alumina.

v. An aluminium conductor alloy with improved conductivity.

vi. Removal of aluminium 10Ns from condensates & 10N exchange methods.

The Company has acquired patent rights on “Extraction of Nickel from Chromite overburden
of Sukinda mines of Orissa” from Hindustan Zinc Limited. The process was developed by
CSIR.

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6.5. Infrastructure Engineering

Process technologies apart, some of the infrastructure engineering features of Nalco have
largely facilitated smooth and cost effective operations of Nalco. Some of these features
are:

i. Transportation of bauxite ore to the alumina refinery across the hills through a
14.6 km long single flight multi-curve cable belt conveyor of 1800 tph capacity.

ii. Co-generation of power from the process steam using 3x18.5 mw back pressure
turbines in the alumina refinery, which accounts for 70% of the total power
requirement of the refinery.

iii. Pit head located Captive Power Plant in the vicinity of the smelter with a
dedicated rail system for continuous delivery of coal from a mine.

iv. Rolling stock of 12 locomotives and 880 broad gauge wagons with private sidings
and exchange yards facilitating smooth transportation of raw material and finished
goods.

v. Captive berth at the inner harbor of Vishakhapatnam Port with automatic alumina
loading system and caustic soda unloading system for export of Alumina and
Import of Caustic Soda.

6.6. Marketing

The domestic sales of aluminium are facilitated by the regional marketing offices located
in Calcutta, Delhi, Mumbai, Chennai and Bangalore through regular customer contacts and
demand assessments. The company is presently operating seven stockyards in different parts
of the country. These locations are Jaipur, Kolkata, Vizag, Bangalore, Bhiwandi, Silivassa,
and Faridabad. There is proposal to open stockyard at Baddi (Himachal Pradesh) and other
places. Domestic sale of Metal is done on ex-factory basis as well as through stockyards
against advance payments or LC.

As a policy, no credit sales are being done presently. Sales are being made through LCs
and advance payments. Export sales are done only through LCs in any first class bank having
transaction with SBI.

Customers taking deliveries from the factory often face bottleneck due to local truck
owners associations. This has been a cause of concern for the Company. The stockyard sales
have helped better customer satisfaction.

Export Marketing is a centralized function carried out from the corporate office. The
Marketing Dept. maintains a record of potential overseas customers through process of
registration/pre-qualification for tendering sales from time to time.

44
 The Company always targets to realize maximum premium over the average LME prices
depending on the market condition. Thus there have been price realizations above LME prices
as shown in the following table.

Table 6.9: Price Realizations (Figures in US dollars / MT)

2008- 2007- 2006- 2005- 2004- 2003- 2002- 2001- 2000-
09 0855 0756 06 05 04 03 02 01
57
Average LME 2227 2640 2567 1899 1778.49 1494.85 1354.13 1395.17 1533.04
Nalco’s 2223 2702 2654 2087 1841.00 1480.00 1362.00 1503.20 1863.51
Realization
(FOB) basis

Alumina and Aluminium produced by Nalco are sold in as many as 3058 countries,
including USA, Japan, China, UK, Norway, France, Brazil, Korea, Indonesia, Singapore,
Hong Kong, Bahrain, Iran, and UAE.

The export sale of metal is mostly concluded on CIF Singapore freight parity. Shipments
to various other ports, if involved, are charged extra.

The export shipment of metal is done from the ports of Vizag, Calcutta and Paradip as
containerized cargos. The transportation is coordinated by the marketing department with the
help from clearing and forwarding agents and the shipping liners.
Alumina export sale is done through both term contracts and spot sales to the highest bidders
and against letter of credits. Shipment is done as bulk cargos from the Vizag Port where the
Company has got required berth and handling facilities.

Table 6.10: Sales Performance of NALCO (Figures in Million MT)

Year 2008- 2007- 2006- 2006- 2004- 2003- 2002-
59
09 08 07 05 05 04 03
Export Alumina 0.852 0.859 0.774 0.863 0.910 0.934 1.037
Sales Aluminium 0.081 0.100 0.092 0.095 0.732 0.129 0.107
Export Income (In cr.) 2071 2134 2585.40 2306 2200.25 1717.27 1500.65
Domestic Alumina 0.022 0.011 0.011 0.013 0.021 0.018 0.011
Sales Aluminium 0.27 0.243 0.262 0.258 0.206 0.167 0.135
Power 81 129 421 322 406 498 411
MU MU MU MU MU MU MU
Domestic Income (In cr.) 3457 3340 3929.11 3017.96 2239.74 1621.60 1239.67
Export Income (In Cr) 2071 2134 2586 2306 2200 1717 1501
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 Year 2008- 2007- 2006- 2006- 2004- 2003- 2002-
09 08 07 0559 05 04 03
Export Income (%) 37 39 40 43 50 51 55
Sale of Power

The Captive Power generation of Nalco at Angul is connected to the State Grid for safety
consideration. To ensure firm supply of power to Smelter there is always some excess
generation. This is sold to the Grid (GRIDCO) at a nominal rate. The Company avails
wheeling facilities against this arrangement for the power requirement of its Mines and
Refinery at Damanjodi. The company also draws power from GRIDCO for its occasional
emergency requirements.

6.7. Human Resource Management

Starting the commercial operations with pay roll manpower of 4518 in 1988, the
Company has manpower of 7466 (Sept, 2008). The broad composition of the manpower is
indicated below.

Table 6.11: Composition of Manpower of NALCO

Composition of 2008-09 2007-08 2006-0760 2005-0661
manpower
Executives 1831 1817 1828 1770
Supervisors 881 842 892 893
Skilled & Highly Skilled 3632 3627 3561 3571
Semi-skilled & Unskilled 1122 1127 1145 1172

The Company sources its non-executives from the local areas and the executives on all
India basis mostly through recruitment of Graduate Engineers. The staff function Depts. like
Marketing, Materials, HRD, Administration etc have executives mostly drawn for line Depts.
or inducted through promotion of non-executives. On few occasions small numbers of
Management trainees have been recruited to staff functional departments.

There are total 27 registered Trade Unions functioning at different Units/Offices of the
Company with affiliation to various Central Trade Union Organisations. The growth in
number of Unions has through resulted acute inter-union rivalry; the Management has been
taking proactive steps in averting industrial unrest. In all the major producing Units, the
Company recognized the Unions having majority of polls in the process of secret ballot.
Regular and structured interactions with these recognised Unions are being undertaken in
resolving the common issues at different level i.e. at Unit, Complex & Corporate.

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 Multiplicity of Unions, politicisation, pressure tactics and militancy amongst the
employees in some area are prevalent in the organisation. Work Culture in the organisation
needs improvement. The situation however seems to be changing for the better in recent
times.
Due to lack of emphasis on office automation in the earlier years there has been high
built up of 689 non-executives (13.78% of the manpower) in the clerical function of the
Company. This excludes as many as 110 executives working in HRD and Administration
Depts. However, of late there have been hardly any inductions under this category.

A great deal of training activities has been taking place in functional and behavioural
areas. A total number of 273 employees have been exposed specialised training and
professional conferences abroad during the last five years. Over last 10 years a total number of
435 employees have left the Company, mostly on account of death, retirement and VRS. The
over all turnover rate is as low as 0.7 per cent.

As per IR policy, one union at each unit is being recognised through secret ballot. The
company believes in participative management. Various statutory and non-statutory joint
committees as per local regulations are functioning in the organisation.

6.8. Organisation Structure

The organisation is multi-layered and is managed through stipulated systems of reporting

relationships and delegation of powers.

There are 20 scales of pay in the patterns of various PSUs. There are 34 cadres or
compartments at junior executive levels, which is reduced to 12 cadres at senior levels. Non –
executive employees are grouped into 6 cadres. This scenario often makes mobility between
cadres as well as multi-skilling exercises difficult.

The top organisation structure follows traditional models with Finance, HR, Production,
Project and Technology functions represented at the Board level. The commercial functions
including marketing, which used to be represented by the Directors from other disciplines,
now has a Director (since August, 2002).

The strategic functions like Business Development and Corporate Planning, R&D etc. are
looked after by below the Board level executives, i.e. Executive Directors or General
Managers in some cases.

6.9. Quality Movement

The Company initiated quality movement with the formation of a TQM Dept. in 1993.
Quality apex council at the top management level in the corporate office and sub-apex
councils at Unit level were formed. Efforts were directed towards obtaining & maintaining

47
Quality Management System certification & Environment Management System Certification
for all manufacturing units, conducting total awareness training programmes on TQM and
specific training on SQC tools. Total productive maintenance initiative is introduced in
Alumina Refinery and CPP. NALCO was awarded the “Quality Award” instituted by Indian
Institute of Metals, in the year 2003, as the best performing Non-Ferrous Industry in the large
integrated manufacturing category.

Quality circles are trained, guided and motivated for working on improvement activities
in their work areas. 53 active quality circles are operating in various units & corporate office.
Some of the Quality Circles have been highly appreciated and recognised in National and
International level QC Conventions.

i. QMS Certification:

Quality Management Systems of all manufacturing units were initially certified to

ISO 9002: 1994 during the period 1994-96. Subsequently, with revision of the
international standards, QMS of all units along with relevant corporate functions
were updated and re-certified to ISO 9001: 2000. The months of original
certification and last re-certification are placed below in table 6.12: -

Table 6.12: Date of Certification of Quality Management Systems (QMS)

SN Initial Last Re-
Certification certification
i. Mines Jan, 1996 Feb, 2008
ii. Alumina Refinery Nov., 1994 Jan, 2007
iii. Aluminium Smelter Feb., 1995 May, 2007
iv. Captive Power Plant Dec., 1995 Mar, 2008

ii. EMS Certification

The environment management systems of all manufacturing units have been

certified to ISO 14001 standards. The months of original certification and last re-
certification are placed below in table 6.13.

Table 6.13: Date of Certification of Environment Management Systems (EMS)

SN Initial Last Re-
Certification certification
i. Mines Aug., 1996 Dec,2006
ii. Alumina Refinery Feb., 1997 Dec,2006
iii. Aluminium Smelter Nov., 1997 Mar, 2008
iv. Captive Power Plant Jan., 1998 Mar, 2007

iii. OHSAS 18001 Certification:

Company has acquired OHSAS 18001 certifications for all the units.

48
6.10. Computerization

Nalco had achieved Y2K compliance much before the eve of new millennium untoward
incident. The roll over to the year 2000 was smooth. The Internet & e-mail messaging services
have been installed in the Corporate Office. The Internet based e-mail services have also been
extended to Smelter, CPP, Mines and Refinery through the Wide Area Network connection.
New application packages are developed and existing application packages are re-engineered
as a step towards technological development in the areas like Finance, Marketing, Share
Transfers, Materials, MIS, and HRD etc. A unique & dedicated IT infrastructure viz, “Virtual
Private Network at NALCO” is in place for taking care of its communication related issues.

In the plant sites there has been extensive computerisation in the field of maintenance,
inventory control, process control, ECS and DCS. At present the company is taking steps to
implement ERP solutions.

6.11. The Competitive Scenario for NALCO

This section details the competitiveness of NALCO with respect to Indian & Global
industry leaders in terms of technological performance parameters for Bauxite Mining,
Alumina Refinery and Aluminium Smelting. In addition, it presents positioning of NALCO in
Alumina- Aluminium Global Scenario- Current and projected to a recommended time frame.
It is to mention here that product mix of the different players is different. Processes and data
presentation are also different, therefore it is very difficult to make one to one comparison.

6.11.1. Global Positioning of NALCO- (Alumina & Aluminium)

(a) Major Indian Players: India’s share of global aluminium production is around 3%. The
Indian aluminum industry is highly concentrated with only five primary plants in the country
from three business groups (two groups are from private sector and the third one is Public
Sector Undertaking). The details of these three groups are given in table 6.14a.

Table 6.14a: Aluminium Players in India

SN Business Groups Players
1 The Aditya Birla Hindalco Industries Limited (Hindalco),
Group Indian Aluminium Company Limited (Indal)
2 Vedanta Resources Bharat Aluminium Company Limited
(Balco), Madras Aluminium Company
Limited (Malco)
3 Public Sector National Aluminium Company Limited
Undertakings (Nalco)

(b) NALCO’s Global Position in Alumina and Aluminium: Global production of Alumina
and Aluminium of NALCO and world is given in table 6.14b and table 6.14c. Top Aluminium
producers’ data along with NALCO is given in Table 6.14d. The data of top Smelter grade

49
 Alumina refineries is given in Table 6.14e. It is evident from table 6.14b that global position
of NALCO in case of alumina production is hovering around 2.0% in the last two years. On
the other hand its aluminium production is around 1.00% of the total world production. It is
evident from the data of Aluminium production of big 10 companies of the world vis-à-vis
Aluminium production of NALCO given in table 6.14d that NALCO is not part of first 10
largest producing companies in the world. However, with the proposed expansion of NALCO
smelter to 1.7 million tons capacity, NALCO may find place among top producer of
Aluminium provided others expansion plans are not implemented during the expansion plan
period of NALCO.

Table 6.14 b: Production of Alumina in World and at NALCO

during 2006-07 & 2007-08
Production (Million Metric Tons) Total
2008 2007
World Production (Metric Tons)62 79.118 75.159
Nalco Production in Fin Yr 1.576 1.575
Nalco Production (% of world production) 1.99% 2.10%

Table 6.14 c: Production of Aluminium in World and at NALCO

during 2006-07 &2007-08
Production Total
(Million Metric Tons) 2008 2007
World Production 39.9 38.13
Nalco Production in Fin Yr 0.366 0.360
Nalco Production (% of world production) 0.92% 0.94%

Table 6.14 d. Big 10 Aluminium Producers in the World63

SN Name of the Company Production (Million Tons)
1 UC RUSAL 4.153
2 Alcoa 3.965
3 Alcan 3.454
4 Chalco 2.034
5 Hydro Aluminium 1.576
6 BHP Billiton 1.349
7 Dubal 0.872
8 Rio Tinto 0.864
9 Alba 0.860
10 Century Aluminium 0.741
11 NALCO 0.360

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50
 The data presented in table 6.14e about top smelter grade alumina refineries vis-à-vis Nalco
specify that NALCO figures among the first 20 Alumina refineries in term of their annual
capacity as per the data available on wikipedia. Brazil, China, and Australia will continue to
dominate the Alumina production in the world.

Table 6.14 e. Top Smelter Grade Alumina Refineries of the World64

SN Country Location Annual Capacity (kt)
1 Australia Pinjarra, Western Australia 4,200
2 Brazil Belem, Alunorte, Barcarena, Pará 4,126 (Plan to be 6400)
3 Australia Gladstone, Queensland 3,954
4 Australia Gove, Northern Territory 3,600
5 Australia Worsley, Western Australia 3,528
6 China Weiqiao 2,500
7 China Zhengzhou 2,490
8 Australia Wagerup, Western Australia 2,400
9 USA Point Comfort, Texas 2,330
10 China Xinfa Huayu (Chiping Xinfa) 2,300
11 China Shanxi Alumina 2,250
12 Suriname Paranam 2,200
13 Australia Kwinama 2,150
14 China Zhongzhou 2,000
15 Venezuela Bauxilum 2,000
16 Ireland Aughinish 1,900
17 Jamaica Alpart 1,700
18 China Shandong Alumina 1,650
19 USA Corpus Christi 1,610
20 India Damanjodi, Orissa 1,600

© Positioning of India as a Aluminium Producer & Consumer: Indian players are among
the lowest cost producers globally, with captive bauxite mines and power plants. NALCO
features in the lowest decile of the global cost curve. This cost competiveness would help
domestic players export the surplus capacity expansions but the negative side for Indian
players is weak demand of Aluminium at home.

From the Fig 6.1, it is seen that per capita consumption of Aluminium stands abysmal at 5lb. It
is even lower than per-capita Aluminium consumption in Indonesia, China and Venezuela, the
countries in the similar per capita GDP segment. It is also lowest in the BRIC subset. The
reason could be availability of cheap substitutes.

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 Fig.6.4. Global profile of Aluminium Consumption
Source: Industry I-Sec Research, & India Aluminium Sector, ICICI Securities, Equity
Research, Nov., 17, 08, http://0301.netclime.net/1_5/1b5/00a/066/Aluminium%20Sector%20-
%20November%2017%202008%20-%20ICICI%20Securities.pdf

Key drivers of the Aluminium consumption in India are different from factors
influencing the global demand. For example, in USA, demand for Aluminium has increased
largely due to the wide use of Aluminium in beverage cans. To mention, 23% of Alcoa’s
revenue come from the packaging and consumer segment. In Europe, the construction sector
accounts for a large portion of Aluminium consumption. In India, construction sector is
dominated by steel usage. The biggest demand driver is power sector in India. Aluminium
players, therefore, concentrate on developing more and more products for domestic market to
compete with low cost substitute.

6.11.2. Production and Sales of Aluminium of HINDALCO & NALCO:

NALCO started its operations in 1987-88 with largest ever alumina and aluminium
production capacities on the domestic scene and enjoyed leadership positions in primary metal
and export of alumina. By 1992-93 the Company had substantial lead over its nearest
competitor Hindalco in aluminium production and sales. However, with Hindalco undertaking
gradual expansion of its capacities and making aggressive entry into downstream products,

52
 Nalco has become second to Hindalco in the aluminium segment and in overall performance
as well. The detailed data is given in Table 6.14.

Table 6.15: Comparative Statistics with respect to Production and Sales of

Aluminium of HINDALCO & NALCO
Hindalco Nalco *
Aluminium Gross Sales Aluminium Gross Sales
Production (Rs. in crores) Production(MT) (Rs. in crores)
(MT)
1992 - 93 1, 63,485 Rs. 975 1, 91,069 1169.00
1999 – 00 2, 48,930 Rs. 2306 2, 12,663 2142.00
2004--05 4, 09,068** Rs. 5168 3, 38,483 4440.00
2005-06 4, 29,14065 Rs 5892 3, 58,954 5324.16
2006-07 4, 42,686 Rs 7344 3, 58,734 6514.51
2007-08 4,77,723 Rs 7145 3,60,457 5474
2008-09 5,23,453 Rs7604 3,65,867 5518
* Gross Sales of Nalco includes sale of power to Gridco.
**includes INDAL merged with Hindalco.

NALCO’s expansion plan approval in 1987-98 has not yet fructified. The company is also
handicapped by practically no value addition project through down stream. Recently acquired
rolled products unit is running at a very low capacity utilization. Further, incidence of high
overheads associated with Govt. enterprises.

6.11.3. Other Financial and Physical Parameters of Competitive Profile of NALCO

The other financial and physical parameters of competitive profile are presented in this
section. The data is taken from the various reports of NALCO and HINDALCO available in
public domain. The major parameters analyzed are (i) share capital and reserve & surpluses
(Table 6.16), (ii) integrated capacities (table 6.17), (iii) energy sources, (iv) product basket, (v)
domestic market share & realization, and (vi) overall corporate performance.

(a). Share Capital and Reserve & Surpluses: Share capital of NALCO is constant but it is
increasing in case of HINDALCO. Reserve and surplus is much higher for HINDALCO in
comparison to NALCO over the last five years. The data for the last five financial years is
given in Table 6.16.

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 Table 6.16: Share Capital of HINDALCO & NALCO
SN 2008- 09 2007-08 2006-07 2005-06 2004-05
1 HINDALCO
Share capital 170.05 122.65 104.3 98.6 92.8
(Crore)
Reserves and 23,584.7 17,173.7 12,310.5 9,501.7 7,564.4
surplus
(Crore)
2 NALCO
Share capital 644 644 644 644 644
(Crore)
Reserves and 9125.5 823066 7,051 5,249 4,054
surplus
(Crore)

(b). Integrated capacities of Hindalco and Nalco: The details of capacities of Nalco and
Hindalco are given in table 6.17. It can be seen from the data that Hindalco has capacity for
more variety of the products. In addition, its plan for expansion is much more than Nalco.
Hindalco67 is planning to have 2.2 million tonnes/ year capacity of its smelter in the next 12
years as against the 1.7 million tons plan proposed as part of this document for the next ten
years. HINDALCO, as a company, consists of copper and other divisions also but here data is
given only for Aluminium division.

(c). Energy Sources of Hindalco and Nalco: Both companies have captive power plants.
The data is given in table 6.18. NALCO meets its total demand from the captive power plant
but HINDALCO buy a portion of its needs from the state electricity boards which results in
higher cost of inputs.

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54
 Table.6.17: Integrated Capacities of HINDALCO and NALCO
Hindalco68 NALCO69
2007-08 (tonnes/year) After expansion (tonnes/year)
Bauxite Mining 6,300,000
Hydrate & Alumina 1,230,000 2,100,000
70
Aluminium Metal 518,000 460,000
Rolled Products 237,000 50,000
Extruded Products 27,700 -
Conductor Redraw Rods 75,000 -
71
Aluminium Foil 40,000 -
Wheels 300,000 pcs -

Power Gen. 900MW 1200 MW

(d). Domestic Market Share of HINDALCO and NALCO: Domestic market share of
Hindalco, the largest Aluminium producer is 42% against 30.2% of NALCO, the second
largest company of the Aluminium sector of the country. Similarly, realization per ton for
Hindalco is Rs. 1,09,364/- against Rs.90235/- of NALCO.

Table.6.18: NALCO and HINDALCO Energy Sources

Company Energy Source
Fully Captive power source is available with Nalco. The total captive
NALCO power capacity is 1200 MW. Cost of power generation to the company
is Rs 1.7 per unit72. It is expecting power cost to fall by Rs 0.10 –
Rs.0.15 per unit. According to another set of data, when NALCO
makes power using imported coal, the cost per unit comes to Rs 5.2473
against Rs 1.68 when local fuel is used.
HINDALCO About 35 percent requirement is sourced from outside. Captive power
cost is Rs.1.16 per unit74. The total captive power capacity is 900 MW
plus.

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70
Note: Capacity is increased by technological up gradation of the existing capacity.
71
Note: Installed capacity of Silvassa Foil Plant has been reassessed at 30,000 tpa by department
of Industrial Policy and Promotion.
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http://0301.netclime.net/1_5/11c/1a6/272/Nalco%20Concall%20Update%20Note.pdf - India Equity
Research I Metals
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 (e). Product Basket of Hindalco & Nalco: The Product basket of Hindalco and NALCO is
detailed in Table 6.19. The size of basket is similar in case of HINDALCO and NALCO but
HINDALCO has much higher content of downstream products in comparison to NALCO.

Table.6.19: Product Basket of NALCO and HINDALCO

Name of the Products Basket
Company
HINDALCO Special Grade Alumina, Aluminium Ingots, Billets, Rolled
Products, Extrusions, Foil, Redraw Rods, Auto Wheels and wire
rods.
NALCO Calcined Alumina Hydrated Alumina, Special Grade Alumina,
Zeolite. Aluminium Ingots, Sows, Billets, Wire Rods, Cast
Strips, Cold Rolled Products, Power.

6.12. Alumina and Aluminum Technology of NALCO & Others.

Alumina and Aluminium technology in general is presented in the first part of this section
followed by specific technology of various players in Aluminium sector. Performance on
various inputs is compared in the last part of this section.

6.12.1. Technology in Alumina and Aluminium Industry:

Aluminium industry’s value chain starts from Bauxite mining to manufacturing of downstream
products. The industry has many technological processes along the value chain but this report
limits the discussions to Alumina refining and Aluminum smelting.

6.12.1.1. Alumina Technology

In alumina production, also commonly named alumina refining, Bauxite is converted to
aluminium oxide using the Bayer process, which uses Caustic Soda and Calcined Lime
(Limestone) as input reactants. Bauxite is ground and blended into a liquor containing sodium
carbonate and sodium hydroxide. The slurry is heated and pumped to digesters, which are
heated pressure tanks. In digestion, iron and silicon impurities form insoluble oxides called
Bauxite residue. The Bauxite residue settles out and a rich concentration of sodium
aluminate is filtered and seeded to form hydrate alumina crystals in precipitators. These
crystals are then heated in a calcining process. The heat in the calciners drive off combined
water, leaving alumina. Fresh Water (input taken conservatively whether the water used
is from fresh, underground, mine waste water, etc. sources) or Sea Water is used as cooling
agent.

The major differences in processing are at the calcination stage. Two types of kilns are used:
rotary and fluid bed. The fluid bed or stationary kiln is newer and significantly more energy
efficient. Energy requirements (Coal, Diesel Oil, Heavy Oil, Natural Gas, Electricity) have
almost been halved over the last 15 years with the introduction of higher pressure digesters and
fluid flash calciners.

56
Air emissions mostly arise from the calcination stage (Particulates; NOx (as NO2), SO2,
from fuel combustion; Mercury found in Bauxite ores), while Water emissions come from
cooling use (Fresh Water, Sea Water, Oil/Grease) or are linked with the digestion stage
(Suspended Solids, Mercury found in Bauxite ores).

Most of the Bauxite residue currently turns out as Solid waste, while a small but growing
fraction is reused. Other by-products for external recycling are reaction chemicals. Other
Landfill Wastes are typically inert components from Bauxite such as sand, or waste
chemicals.

6.12.1.2. Aluminium Technology

There are two types of aluminium smelting technologies that are distinguished by the type of
anode that is used in the reduction process: Söderberg and Prebake. Thus the two major
technology components are the anode production and electrolysis.

Anode Production: Söderberg design uses a single anode, which covers most of the top
surface of a reduction cell (pot). Anode paste (briquettes) is fed to the top of the anode and
as the anode is consumed in the process, the paste feeds downward by gravity. Heat from
the pot bakes the paste into a monolithic mass before it gets to the electrolytic bath interface.

The Prebake design uses prefired blocks of solid carbon suspended from Steel axial busbars.
The busbars both hold the anodes in place and carry the current for electrolysis.

The process for making the aggregate for briquettes or prebake blocks is identical. Petrol
Coke is calcined, ground and blended with Pitch to form a paste that is subsequently formed
into blocks or briquettes and allowed to cool. While the briquettes are sent direct to the pots
for consumption, the blocks are then sent to a separate baking furnace.

Baking furnace technology has evolved from simple pits that discharged volatiles to
atmosphere during the baking cycle to closed loop type designs that convert the caloric heat
of the volatile into a process fuel that reduces energy consumption for the process. Baking
furnace use Refractory materials for linings, Fresh Water (input taken conservatively
whether the water used is from fresh, underground, mine waste water, etc. sources) as
cooling agent. Baking furnace account for most of energy consumption (Coal, Diesel Oil,
Heavy Oil, Natural Gas, Electricity).

Air emissions: Fluoride Gaseous (as F), Fluoride Particulate (as F) arise from
recovered spent anode materials (un-used anode ends - "anode butts") from Electrolysis (see
below) recycled within Prebake Anode Production. Particulates, NOx (as NO2), SO2,
come typically from fuel combustion.

Total PAH, which includes BaP (Benzo-a-Pyrene), are air emissions generated from the
basic Anode Production process.

The common practise for pollution control from Anode baking furnaces is scrubbing with
alumina and returning the alumina to the electrolysis process. In case of separate Anode

57
baking plants this is replaced by coke and lime scrubbing, which is then returned to the
process. For paste plants the common pollution prevention is coke scrubbing and
returning the coke to the process. There are some plants still using Water scrubbing, but this
is not best practise and not the common method. The water emissions from paste and anode
plants come from the cooling of the paste or green anodes.

By-products for external recycling: this means recovery of used Steel from anode bars, or of
used Refractory material from baking furnaces. Various Other by-products are also
recovered, e.g. carbon recovered for re-use.

Solid waste not recycled (landfill): Waste Carbon or mix is a residue from anode
production, Scrubber sludges arise from water scrubbing used for control of air
emissions mentioned above, Refractory waste comes out from baking furnaces Other landfill
wastes arise as various residues, e.g. carbon fines.

The Electrolysis process: It is commonly named Aluminium Smelting. Often Aluminium is

produced from alumina (aluminium oxide) by the Hall-Heroult electrolytic process that
dissolves the alumina in a molten cryolite bath (re: Aluminium Fluoride input) and passes
current through this solution, thereby decomposing the alumina into aluminium and oxygen.
Aluminium is tapped out of the reduction cell (pot) at intervals and the oxygen combines with
the carbon of the anode to form carbon dioxide.

The pot consists of a Steel (for cathodes) shell lined with Refractory materials insulation
and with a hearth of carbon (Cathode Carbon (for Electrolysis)). This is known as the
cathode. The cathode is filled with a cryolite bath and alumina and an anode is suspended
in the bath to complete the circuit for the pot. Once started, a pot will run continuously for the
life of the cathode, which may last for in excess of 10 years. At the end of its life each pot is
completely refurbished. Steel from used cathodes is recovered for recycling. Refractory
materials are either recycled as by-products or land filled (Refractory waste - landfill).
Spent pot linings (SPL), which include a carbon-based (SPL carbon) and a refractory-based
part (SPL refractory bricks) are either recycled as by-products (SPL carbon fuel/reuse, SPL
refr.bricks-reuse) or landfilled (SPL -landfill).

The current in a pot varies from 60,000 to over 300,000 amperes at a voltage drop of 4.2 to
5.0 volts. Pots produce about 16.2 plus/minus 0.6 pounds per day of aluminium for each
kiloampere at an operating efficiency of 91% plus/minus 4%. Electricity consumption
is the major energy aspect of Electrolysis.

Aluminium smelters typically use air pollution control system to reduce emissions. The
primary system is typically a scrubber. Some plants use dry scrubbers with alumina as the
absorbent that is subsequently fed to the pots and allows for the recovery of scrubbed
materials. Other plants use wet scrubbers, which re-circulate an alkaline solution to absorb
emissions: the wet scrubbing process uses Fresh Water (input taken conservatively whether
the water used is from fresh, underground, mine waste water, etc. sources) or Sea Water as
input and result in corresponding Fresh Water or Sea Water discharges. Unlike dry
scrubbers, wet scrubbers absorb carbon dioxide, nitrogen oxide and sulphur dioxide that are
entrained in the waste water liquor (which is subsequently treated prior to final discharge).
Scrubber sludges are land filled.

58
Air emissions: specific aluminium Electrolysis process emissions are Fluoride Gaseous (as
F), Fluoride Particulate (as F), which arise from the molten bath; Total PAH, which includes
BaP (Benzo-a-Pyrene), which arise from anode consumption; CF4 and C2F6, commonly
reported as PFC, are gases generated with an uncontrolled anode overvoltage situation
named "anode effect". Particulates, NOx (as NO2), SO2, come typically from fuel
combustion.

Water emissions: Fluoride (as F) and PAH (6 Borneff components: which are monitored
because of their particular environmental effect) arise from the same origin as their air
emission equivalents above. Suspended Solids and Oil/Grease (or total HC)
are monitored in water discharges from wet scrubbing.

Solid waste: Other landfill wastes consist typically of about 60 % of "environmental

abatement" waste (such as dry scrubber filter bags) and 40 % of "municipal" waste
(source: North American Aluminum Association LCI report 1998).

The inputs and outputs for the production of 1 ton of aluminum are given in table 6.22 and
table 6.23. As there can’t be much of product differentiation in Alumina and aluminium, the
industry competes on the basis of cost leadership. This is achieved through superior
technology that reduces the cost of inputs and generates least waste while meeting all
environmental requirements.

59
 Table 6.22. Inputs for 1000 kg Primary Aluminium
Raw materials Raw materials Bauxite Alumina Anode Electro Cast Total Units
Mining Producti Produc lysis House
on tion
Bauxite 5268 5268 kg
Caustic Soda 172 172 kg
Calcined Lime 76 76
Alumina input 1923 kg
Petrol Coke 348 kg
Pitch 88 kg
Anode 435 kg
Aluminium fluoride 16,4 16,4 kg
Cathode carbon 8,0 8,0 kg
Aluminium (liquid metal) 1000
Alloy additives 20 20 kg
Chlorine 0,036 0,036 kg
Cast ingot 1000
Other raw material inputs
Fresh Water input 2,6 15,2 10,7 28,6 m3
indicative split 1,0 5,3 4,5 m3
Sea Water input 0,3 0,2 17,6 18,0 m3
Refractory material input (excluding SPL) 2,7 5,4 8,0 kg
Steel 2,2 6,6 8,9 kg
Fuels and electricity
Coal 170 1,0 1,2 173 kg
Diesel Oil 6,0 1,3 1,0 1,4 9,7 kg
Heavy Oil 1,3 195 4,9 5,7 207 kg
Natural Gas 0,002 223 23 30 277 m3
Electricity 10 242 56 15289 83 15680 kWh
Source: International Aluminium Institute
Table 6.23. Outputs for 1000 kg Primary Aluminium
Air emissions Bauxit Alumina Anode Electr Cast Total Units
e Productio Producti olysis House
n on
Gaseous Fluoride (as F) 0,006 0,55 0,56 kg
Particulate Fluoride (as F) 0,001 0,49 0,49 kg
Particulates 5,0 0,33 0,09 3,7 0,04 9,2 kg
NOx (as NO2) 1,7 0,11 0,32 0,09 2,2 kg
SO2 6,5 0,85 14,9 0,03 22,3 kg
Total PAH 0,028 0,29 0,32 kg
BaP (Benio-a-Pyrene) 0,034 2,6 2,6 g
CF4 0,13 0,13 kg
C2F6 0,013 0,013 kg
HCI (Hydrogen chloride) 0,009 0,009 kg

60
Mercury 0,40 0,40 g
Water emissions
Fresh Water discharge 2,5 10,2 10,2 22,9 nr
indicative split 0,4 4,9 4,9 nr
Sea Water discharge 0,25 0,25 17,6 18,1 nf
Fluorides (as F) 0,0002 0,32 0,32 kg
PAH (B Eiorneff components) 0,055 1,64 1,69 g
Oil and grease/hydrocarbons 0,91 0,00004 0,008 0,009 0,92 kg
Suspended Solids 0,10 0,001 0,20 0,02 0,32 kg
By-products for external recycling
Bauxite Residue 21,3 21,3 kg
Dross 11,7 11,7 kg
Filter dust 0,55 0,55 kg
Refractory material (excluding SPL) 2,9 2,3 0,2 5,4 kg
SPL- carbon 4,8 4,8 kg
SPL- refractory 4,0 4,0 kg
Steel 1.6 8,9 10,6 kg
Other by-products 10,7 2,7 13,4 kg
Solid waste
Bauxite residue 2196 2196 kg
Alumina waste 2,6 2,6 kg
Carbon waste 7,9 6,9 14,8 kg
Dross - landfill 2,2 2,2 kg
Filter dust - landfill 0,14 0,14 kg
Refractory (exci. SPL) - landfill 0,8 0,5 1,0 2,3 kg
SPL- landfill 13,2 13,2 kg
Scrubber sludges 0,2 4,7 4,9 kg
Other land filled waste 47,3 1,8 0,2 47 kg

Source: International Aluminium Institute

61
 6.12.2. Alumina Technology used globally - Major Players of India & some others in
World.

This section presents the Alumina technology of major Alumina players. The details of the
process followed are given in table 6.24. The first part of the table 6.24 briefly mentions the
basic refining technology that is Bayer Process followed by its customization by different
players.

Table 6.24. Alumina Technology of Major Alumina Players

Alumina Bayer process is the basic alumina refining technology. Firms
Technology have modified the technology from time to time to suit their
Bauxite input quality, increased productivity, reduction in energy
consumption, meeting environmental requirement etc. The main
improvements in refining are sintering of bauxite and medium
pressure digestion.
NALCO The present capacity of alumina refinery of Nalco75 at Damanjodi
is 2,100,000 tpa. The technology features of the plant includes (i)
Atmospheric pressure digestion process, (ii) pre-desilication and
inter-stage cooling for higher productivity, (iii) energy efficient
fluidised bed calciners, (iv) co-generation of 3 x 18.5 MW power
by use of back pressure turbine in steam generation plant, and (v)
advanced red mud disposal system.
HINDALCO It was commissioned with an initial capacity of 40,000 MTPA,
which has now increased, to 700000 MTPA. It employs the basic
Bayer's process and the major raw materials for the plant are
Bauxite, Steam, Caustic Soda and Furnace oil. The plant has been
expanded in phases using new technology from time to time for
energy efficiency and capacity enhancement. They are in the
process of changing the digestion process from atmospheric to
medium pressure.
BALCO/Vedanta The BALCO expansion envisages increasing alumina production
Aluminium from 1.8 to 8.3 lakh tones. VAL has set up a 1 MTPA Greenfield
Limited Alumina Refinery with captive power plant at Lanjigarh76.
BALCO is a subsidiary of Vedanta group through Sterlite. Both
these units will operate on basic Bayer Process.
Worsley Alumina The Worsley alumina refinery uses the Bayer process to produce
metallurgical grade alumina, which is used as feedstock for
aluminium smelting.
United RUSAL Cutting-edge technologies used by the refinery provide for the
production of aluminium hydroxide, both smelter grade and
special alumina, as well as abrasive and refractory materials
made of white fused alumina of various grain sizes. The refinery

75
http://www.nalcoindia.com/atgdefault.htm
76
http://www.merinews.com/catFull.jsp?articleID=15708834 (28.01.09).

62
 operates a technology involving sintering of low-quality bauxite.
With such technology the refinery can process high-silica bauxite
from different deposits, which Bayer refineries are not capable of
processing. Specialists in the refinery continuously work to
enhance the applied technology.
New Trends in CSIRO and the Parker Cooperative Research Centre (CRC) for
technology Integrated Hydrometallurgy Solutions are working on following
technology improvement.
• bauxite characterization
• desilication
• digestion
• solid-liquid separation processes
• precipitation chemistry and modelling (covering gibbsite,
oxalate and scales)
• control of impurities and impurity mitigation
• calcination processes
• residue treatment and disposal
• physical and numerical modelling of unit operations
• Swirling Flow Technology (developed with and used by
Queensland Alumina Ltd) which improves suspension of
solids and mixing in precipitators, greatly reducing costs
and allowing easier restarts.
While work is going on in above technology areas, alumina
refineries world over are switching from atmospheric digestion to
medium pressure digestion.

6.12.3. Aluminium Technology used globally

The smelter technologies used by Indian players such as NALCO, Hindalco, and BALCO as also
that of some global players are listed in table 6.25. It can be inferred from the table that main
technology of NALCO and Hindalco will be AP Technology where as BALCO has gone for
Chinese technology.

Table 6.25: Smelter Technology of Major Players

Smelter Technology Soderberg and Prebaked electrode processes are the two basic
technologies being used by smelters. Most of the Soderberg smelters
have either closed down or have switched over to Prebaked electrode
technology. The Prebaked electrode (present and past AP
Technology) platforms include AP18, AP2277, AP30, AP3578, AP36,
AP3X (AP37, AP39), and AP50. The major thrust of research and

77
AP 22 technology is implemented in Alunar Aluminio, Argentina (http://www.aluar.com.ar/us/index.asp). AP
Newsletter No. 12- February, 2008.
78
Sohar Aluminium Company, OMAN’s Green field plant. (http://www.sohar-aluminium.com/)

63
 development programs is to deliver energy and emission reduction
for all past, present and future technologies. It was announced by Rio
Tinto Alcan that new AP Xe Aluminium smelter technology79 will
reduce energy consumption by 20%.

NALCO With the expansion, the 960 pot smelter will be the largest AP18
technology80 based plant in the world. Rio Tinto Alcan is the
NALCO’s technology partner of Choice. The company is also in the
process of upgrading its AP 18 technology to do electrolysis at 22 K-
Amp.

HINDALCO HINDALCO industries started with Horizontal Stud Soderberg

(HSS) technology but it has updated its smelter Technology and
today it works with Prebaked graphite anodes. Further updation has
been through internal R&D. It is understood that they are presently
using 22KA in electrolysis. They are also using slotted electrodes.
On September, 2007 HINDALCO and ALCAN signed a Technology
Transfer Agreement (TTA)81 to build three Aluminium plants
(Aditya- Orissa, Mahan-Madhya Pradesh, and Latehar-Jharkhand) in
India. Each plant will have one potline of 360 Pots featuring AP 36
technology.

BALCO BALCO uses Vertical Stud Soderberg (VSS) technology to produce

Aluminium from Alumina. It consumes much higher energy and also
pollutes the atmosphere to a much higher degree compared to AP
technology. Since its takeover by Sterlite group, there has been
updation of technology. They have now gone for Chinese GAMI
technology in which they have made in house improvements.

UC RUSAL UC RUSAL smelters use Soederberg technology. Recently, it

claimed to have successfully launched test production of the key
component of a unique environmentally sound aluminium production
technology - colloidal anode paste82. From 2010 to 2015, it will be
implemented in all smelter units of the Company

New Technology Alcan83 is in the process of establishing advanced AP50 technology,

which produces 67% more than a 300kA84 potline and 39% more
than 360kA potline, through US $ 550 million facility in Quebec
(Canada) which will make it world leader and partner of choice for

79
http://www.riotinto.com/media/5157_7315.asp
80
AP News Letter No. 12- February, 2008.
81
AP News Letter No. 12- February, 2008.
82
http://suppliersandequipment.mining.com/2008/06/11/uc-rusal-%E2%80%98greens%E2%80%99-aluminium-
production/
83
http://proquest.umi.com. PRNewswire: New York December 14, 2006. ABI/FORM dateline
84
http://www.ap-technology.com/pdf/AP_50_08.pdf

64
 Aluminium Smelting technologies.
Slotted anodes are used now as it improves the escape of CO2 thereby
reducing the resistance resulting in lesser energy consumption in
electrolysis. Research is on for configuring the best slotting design to
minimize the specific power consumption in smelting.

6.12.4. Comparison of NALCO With other Competitors with respect to Inputs.

(a) Bauxite Cost: It can be seen from the table 6.26 that NALCOs’ cost of Bauxite is much
lower than the other players in India and abroad. United States has the highest cost of Bauxite
followed by Germany.

Table 6.26. Bauxite costs per tonne of Aluminium

Country Company Cost (US$)
Australia Nabalco 43
Brazil Alcan 66
Guinea Frigula 64
Jamaica Alpart 106
Germany AOS 148
US Alcoa 147
US Kaiser 160
India Nalco 12

(b) Power: The data with respect to cost of power is given in table 6.27 and Fig. 6.2. It is
evident from the data that cost of power is higher to HINDALCO in comparison to NALCO.
The main contributors for higher cost are (i) drawing partial power from State Electricity
Boards (SEBs), (ii) high transport cost of coal, and (iii) distribution losses on account of
power transfer from Renusagar Power Plant. Globally, power consumption per tonne of
aluminium is between 13000-15000 KwH. In case of Indian smelters the power consumption
is higher than the global standards due to technological snags.

Fig. 6.5. Electricity Usage – Purchased V/s Generated

Source: Annual Reports- Nalco, Hindalco, Malco

65
 Table.6.27: Consumptions per MT of Aluminium 2006-07 at NALCO and HINDALCO
Hindalco Nalco
85
Electricity 15939 kwh 14965kwh
Furnace Oil 225 litres 80.7litres
Aluminium Fluoride 12.99kg 25.1kg
CP Coke 384.5kg 381kg
CT Pitch 108.39kg 98kg
Steam Coke 1.298 MT

Fig 6.6. Electricity Consumption per tonne of Aluminium

Source: Annual Reports of NALCO, HINDALCO, MALCO

© Other Inputs : Other raw material cost (Caustic Soda, C.P. Coke, C.T. Pitch and Aluminium
Fluoride for the year 2008 are given in Figure 6.4 and Table 6.28 (Only for NALCO). For the
first two inputs (Caustic Soda, and C.P. Coke) Nalco is cost leader and for the last that is C.T.
Pitch and Aluminium Fluoride Hindalco is cost leader.

Table 6.28. Additional Data on Specific Consumption of raw material at NALCO:

UNIT PRESEN Actual Actual

T NORM AP Recommendation 07-08 08-09
Cast metal
Hot metal basis-
basis worked out
SP CONSP-CP COKE KG/MT 381 379 383 381 382
SP CONSP-CT PITCH KG/MT 99 99 100 98 93
SP CONSP – AC KWH/MT - 14765 14714
POWER
SP CONSP-DC KWH/MT 13,660 Pl:I&II- 13,700 13,589 13628
POWER EXL START 13,800
85
http://www.hindalco.com/investors/downloads/Hindalco_Annual_Report_FY2007.pdf

66
UP LOSS Pl:III-
13,500
SP CONSP-FUEL OIL Ltr/MT 93 No 94.3 90.5
recomme
ndation
SP CONSP-AL KG/MT 23 23.2 24.20 23.3
FLUORIDE 23
* not considering RPU: Source: NALCO

Fig 6.7. Raw Material Break Up of Per Tonne of Aluminium during 2007-08

(d) NALCO V/s Chinese Smelter Cost

The cost comparison of NALCO and Chinese Smelter for different components is given in
Fig 6.5. It is evident from the figures that the major difference is due to cost of Alumina and
cost of power. The rest two components are almost similar.

Fig.6.8. Chinese Smelter V/s NALCO cost

67
 (e) Operating costs excluding overheads86

Operating cost comparison of global and national major players NALCO and Hindalco is
given in fig.6.6. Operating cost is highest for Alcoa which is much higher than the world
average. On the other hand NALCOs’ and HINDALCOs’ operating costs are at par with each
other but much lower than the world average. However, it is improper to make comparison of
inputs for any two companies because of the processes and practices being different.
Notwithstanding, data is given in table 6.29a and 6.29b.

Fig. 6.9. Operating cost of major players (Excluding overheads)

Table 6.29a : Specific Consumption of Major Raw Material

during 2007-08 & 08-09 at NALCO
SN Alumina Refinery 2007-08 2008-09
1 Caustic Soda(kg/MT) 73.24 72.24
2 Lime (kg/MT) 29.49 33.69
3 Coal(kg/MT) 606.0 605
4 HFO (Calcination) 77.89 77.59
(ltr/MT)
5 Power (Self Gen) 206.63 212.49
(kwh/MT)
6 Power (Grid) 95.25 126
(kwh/MT)
7 Bauxite (Wet) (T/MT) 3.043 3.026
CPP (Net)
1 Coal(kg/kwh) 0.870 0.87
2 Fuel Oil(kg/kwh) 1.270 1.019
Smelter
1 CP Coke(kg/MT) 381 382
2 CT Pitch(kg/MT) 98 93
86
http://0301.netclime.net/1_5/1b5/00a/066/Aluminium%20Sector%20-%20November%2017%202008%20-
%20ICICI%20Securities.pdf

68
 3 Al. Fluoride(kg/MT) 24 23.3
4 Alumina(T/MT) 1.933 1.924
5 DC Power(kwh/MT) 13,589 13628

Table 6.29b: Consumption per Unit of Production (per MT) at HINDALCO

S Item Raw Material 2007-08 2006-
N 07
1 Aluminium Metal
(including Alumina) Electricity kwh 15,826 15,939
Furnace Oil (Liters) 229 225
Steam Coal MT 1.349 1.298
2 Redraw Rods (including
Alloy Rods) Electricity kwh 57 61
Furnace Oil Litres 26 30
3 Fabricated Products
(Rolled & Extrusion) Electricity kwh 966 976
Furnace Oil Litres 54 55
4 Aluminium Foil
Electricity kwh 970 995
5 Aluminium Wheel
Electricity kwh 62 55
6 Copper Cathodes
Electricity kwh 1,646 1,858
Furnace Oil Litres 20 46
Propane Kg - 24
Naptha kg 40 49
RLNG SCM 60 71
7 Copper Rods
Electricity kwh 56 57
Propane kg 1 1
RLNG SCM 43 40
8 Di Ammonium
Phosphate (DAP/NPK) Electricity kwh 189 166
Furnace Oil Litres 6 5

6.13. Business strategies

The business strategies of the Hindalco and Nalco are listed in table 6.30

69
 Table.6.30: Business Strategies of NALCO & HINDALCO
SN HINDALCO NALCO
1 Growth and value creation Manufacturing Alumina and
through consolidation, Primary aluminium with
acquisition and merger is the operations in value added
current philosophy of Hindalco. intermediate products are
considered to be among the core
strengths of the Company.
2 Hindalco is expanding alumina, Nalco plans to improve stockyard
metal and power capacities in the sales and improve the customer
brown field. services
3 Hindalco has acquired Indal to The Rolled Product Unit of IAPL,
leverage its presence in the acquired and merged with Nalco
downstream sector. Cost has started commercial production
reduction, new applications and
product development are the
thrust areas
4 The Company plans to While consolidating existing
manufacture and sale operations, Nalco has plans to
downstream products at a price achieve substantial increases in
jointly pre-determined with the basic capacities during next 5
customer years. It may also set up joint
sector projects in this direction.
5 Hindalco is adopting various risk The company may go for
management strategies including backward integration for critical
hedging. raw materials like Coal, Caustic
Soda and Lime etc. It may acquire
more coal mines to keep power
cost competitive
6 The company is sourcing number With backward integration, it may
input materials from its source some of the input material
subsidiaries and associates. through its SBU/ Subsidiary/
Associate

6.14. Awards & Recognition of NALCO & HINDALCO: The list of awards and
recognitions of HINDALCO and NALCO is given in table 6.31.

70
 Table 6.31: Awards & Recognition of NALCO & HINDALCO
SN HINDALCO NALCO
1 National Energy Conservation Highest Export Award in ore
Award from the Ministry of and mineral sector from Capexil.
Power, Govt. of India. Top Export Award from EEPC
2 Best Safety Performing Plant in The Best Exporter Award in
the world recognition from metallurgical products from
International Aluminium Institute Govt. of Orissa.
3 Entered “The Asia – Top 25 ” list CSIR Technology prize for
of CFO Asia Annual Report Development of Process
Survey. Technology for Zeolite ‘A.
4 Outstanding Export awards from Environment award for Mines
Capexil & EEPC from FIMMI
5 Award for outstanding work in Orissa State Pollution Control
Rural Development from FICCI Excellence Award for Alumina
(Rs.29.73 crore spent on Refinery
community initiatives during 2001
-02).

Annexure-A

Definition of Terms

Reserves87.—That part of the reserve base which could be economically extracted or produced
at the time of determination. The term reserves need not signify that extraction facilities are in
place and operative. Reserves include only recoverable materials; thus, terms such as
“extractable reserves” and “recoverable reserves” are redundant and are not a part of this
classification system.

Reserve Base88.—That part of an identified resource that meets specified minimum physical
and chemical criteria related to current mining and production practices, including those for
grade, quality, thickness, and depth. The reserve base is the in place demonstrated (measured
plus indicated) resource from which reserves are estimated. It may encompass those parts of
the resources that have a reasonable potential for becoming economically available within
planning horizons beyond those that assume proven technology and current economics. The
reserve base includes those resources that are currently economic (reserves), marginally
economic (marginal reserves), and some of those that are currently sub-economic (sub-
economic resources). The term “geologic reserve” has been applied by others generally to the
reserve-base category, but it also may include the inferred-reserve-base category; it is not a
part of this classification system.

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VISION DOCUMENT

(2009-2020)

PART-II

VISION & MISSION

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 NEW VISION & MISSION OF NALCO

Based on workshop conducted by MDI at various units of NALCO, brain storming session at
Corporate Office and after the approval of Board of NALCO for vision, the new vision, mission,
and objectives statements of NALCO may be read as

New VISION

To be a reputed global company in the metals and energy sectors.

New Mission

• To achieve sustainable growth in business through diversification, innovation and global

competitive edge.
• To continuously develop human resources, create safe working conditions, improve
productivity and quality, and reduce cost and waste.
• To satisfy the customers and shareholders, employees, and all other stakeholders.
• To be a good corporate citizen, protecting and enhancing the environment as well as
discharging social responsibility in order to ensure sustainable growth.
• To intensify R&D for Technology development.

OBJECTIVES & GOALS

• To achieve annual turnover of over Rs.25,000 Crores by 2020.

• To achieve annual production of 1.7 million ton Aluminum and 4 million ton Alumina by
2020.
• Transform from being only an “aluminum producer” to become a metal producer and
energy provider.
• To venture into new fields of activity beyond Aluminum by setting up at least 2 nos.
diversified projects by 2016.
• To target at least one 1000 MW IPP by 2016.
• To maximize value and long term return to share holders through a strategy of new
investments, cost competitive mines and business driven by the quality of products and
services.
• To develop long-term relations with domestic and foreign clients and Joint Venture
partners.
• To develop a powerful scientific and technical base. Apart from investments in volume
growth, the company shall substantially finance R&D and modernization of facilities,
laboratories, achieving improvements in the quality of products and satisfying customer
demands.
• To adopt main strategic priorities aimed at end user orientation.

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