Nalco to trim aluminium cost by 25% after its in-house captive coal block becomes operational

Followed by experiencing windfall gains from booming metal prices at LME, state-owned integrated aluminium complex Nalco now aims at improving its profitability further after Utkal D block becomes operational.

Nalco was given two captive coal blocks – Utkal D and E – with a combined deposit of 200 million tonnes, out of which, the former is expected to start operating from the end of the year or beginning next year and reduce Nalco's aluminium production cost by 25 per cent by providing the necessary amount of coal as required energy, aiding company to save up to US$500 or INR 35,000 per tonne of aluminium churned out at Nalco’s 0.46 million tonne smelter at Angul.

“Most of the statutory clearances for the block are in place and it will be a game changer for the company”, said TK Chand, chairman and managing director, Nalco.

In the recent time, all the bonanza that Nalco made had come from the sale of alumina where the margins were more than 200 per cent, compared to which the margins in aluminium were lower. The remuneration for the company’s aluminium operation was also lesser, with costs hovering around US$1950 per tonne at present, on account of the aluminium price below US$2000 per tonne at LME, sources said.

In this backdrop, the savings of US$500 per tonne of aluminium will improve the margins along with giving enough cushions for smelter unit’s profitability at bad times. Apart from access to captive coal, the proposed in-house production of caustic soda and steps to reduce bauxite mining cost are also expected to bring down aluminium production cost at Nalco.

“Our plan is to be the lowest cost producer of bauxite in the world. Steps are being taken to bring down bauxite raising cost by about a dollar per tonne through use of modern technology like trench mining and complete mechanisation”, said TK Chand.

Similarly, Nalco’s caustic soda project in joint venture with Gujarat Alkalies at Dahej is scheduled to go on stream in Q1 FY2020.