Nalco May Shutdown Alumina Refinery on Coal Shortage (Update2)
By Debarati Roy
July 29 (Bloomberg)
National Aluminium Co., India's biggest state-run producer of the metal, may be forced to shutdown its 1.6 million-ton alumina refinery in a few days because of a coal shortage.
Daily output at the Damanjodi plant in the eastern Orissa state has halved to about 2,000 metric tons since July 26, said Chairman C.R. Pradhan in a phone interview. The refinery burns 2,500 tons of coal everyday to make 4,500 tons of alumina, he said.
This is a second time in as many months that Nalco, as the company is known, has been forced to cut production because of a coal shortage, mirroring problems faced by its bigger Asian rivals. Aluminum Corp. of China Ltd. and 19 Chinese producers on July 10 agreed to reduce output by as much as 10 percent because of a nationwide power deficit.
``Coal is the weakest link as production is getting regularly hampered because of supply problems,'' Rakesh Arora, an analyst at Macquarie Group in Mumbai, said. The brokerage has an ``underperform'' rating on the company.
Thermal coal prices have surged fivefold in the past five years because of Asian demand and infrastructure bottlenecks in Australia, the world's biggest supplier of the fuel. Companies including Xstrata Plc won a 125 percent gain in contract prices in the year that started April 1 to $125 a ton.
Nalco's aluminum output declined 30 percent for six days in June after supplies from Coal India Ltd., a state-run monopoly, to its 960- megawatt plant were disrupted by a strike. The shortfall may persist because the government has said it will give companies building large electricity plants priority access to coal pits to overcome shortages of as much as 15 percent during peak hours.
``Coal is a constant problem and with the government getting more stringent with coal allocation to metal companies, we may have harder days ahead,'' Pradhan said. He declined say how Nalco plans to overcome the shortfall.
Nalco plans to import 100,000 metric tons of coal in two months, Pradhan said July 17. The company, which makes 345,000 tons of aluminum and 1.6 million tons of alumina annually, is developing a mine with 2 million ton thermal coal mine to secure fuel supplies.
The company requires 14,000 tons of the fuel daily to fire its power plant. Electricity accounts for about 30 percent of costs for aluminum smelters.
Nalco's shares declined as much as 3 percent to 416 rupees in Mumbai trading, extending the year-to-date loss to 13 percent. The stock was at 424.5 rupees at 1:03 p.m. local time.
To contact the reporter on this story: Debarati Roy in Mumbai at email@example.com