Aluminium
The world aluminium market in 2007 was expected to end with a surplus of 42,000 tonnes against the estimated shortage of 372,000 tonnes in the preceding year. Global demand for primary aluminium was expected to grow 5.8% in 2007 and 6.0% 2008, while the global supply was expected to rise 7.0% in 2007 and 6.9% in 2008, a result of rapid expansion of the industry in China.
The worldwide capacity to produce alumina was placed at around 80 mn tonnes in 2007 and was slated to touch 100 mn tonnes in 2010. Alumina accounts for about 22% of the cost in the production of aluminium.
India's share in world aluminium market is estimated at around 3%. India ranks fifth in bauxite production after Australia (62 mn tonnes), Guinea (17.50 mn tonnes), Brazil (16.20 mn tonnes) and China (10.75 mn tonnes). With a total output of 9.25 mn tonnes, the country contributes about 6% of the world's total production of 159 mn tonnes, India holds the fifth position in reserves base and is ahead of China with 2300 mn tonnes. India ranked seventh in alumina production with a total output of 3 mn tonnes, a share of nearly 5% of the global production of 61 mn tonnes.
The per capita consumption of aluminium in India continues to remain abysmally low at under 1 kg as against nearly 25 to 30 kg in the US and Europe, 15 kg in Japan, 10 kg in Taiwan and 3 kg in China.
Aluminium has a wide range of applications, from aircraft building to packaging, a major consumer being the electrical industry. The two sectors, electricity and transportation, account for more than half of the total offtake.
The key consumer industries in India are power, transportation, consumer durables, packaging and construction. Of this, power is the biggest consumer (about 44% of total) followed by infrastructure (17%) and transportation (about 10% to 12%). However, internationally, the pattern of consumption is in favour of transportation, primarily due to large-scale aluminium consumption by the aviation industry. White goods account for nearly 5% of aluminium consumption in the country. The products include electric fans, air conditioners, refrigerators and coolers. The white goods industry uses both extruded products and flats.
In the transportation sector, aluminium is used for panelling, floors and windows. So far, it is not used for structural parts and bodies of automobiles. An Indian car uses only about 54 kg of aluminium against a global average of 100 to 110 kg. This sets the high potential for growth with the increase in the automobile sector.
Demand for aluminium is estimated to grow at 4 to 6% per annum. The demand for the metal is expected to pick up as the scenario improves for user industries like power, infrastructure and transportation, which are all on the move.
The Indian aluminium industry's production expanded by only 7% during 2006-07 against some 20% in 2005-06. This was mainly on account of subdued demand from the power sector, which expanded by 7% as opposed to 23% in 2005-06. However, consumption of the metal continued to be strong in the transportation and construction sectors with growth rates in the region of 15%.
Total market of primary aluminium was estimated at Rs.124 bn in 2007-08 which meant a decline marginally of around 1% over that of the preceding year. The domestic supplies constituted around 85%.
In the recent past, major developments have occurred globally in the area of consolidation of the industry. Alcan Aluminium, Canada, acquired Pechiney SA of France and the aluminium business of the Alsuisse Lonza group of Switzerland. The conglomerate, Alcan-Pechiney Algroup (APA) controls over 10% of the global aluminium supply. ALCOA of the US, the world's largest producer, acquired Reynolds, the third largest aluminium producer in the US. The ALCOA-Rey-nolds combine operates at more than 300 locations in 36 countries. In India, the private sector leader, Hindalco Industries, a Aditya Birla company, acquired Indal (Indian Aluminium Ltd) while Balco (Bharat Alumi-nium), a Government of India undertaking, had gone through a strategic sale to Sterlite Industries.
The Indian aluminium industry has an annual installed capacity of the order of 1.18 mn tonne of metal. At an estimated production of around 1.13 mn tonne in 2006-07, the industry recorded capacity utilisation level of nearly 95%. Domestic demand is estimated to go up to nearly 1.1 mn by 2009-10 from over 970,000 tonne in 2006-07. The demand of aluminium is further expected to touch 1.5 mn tonne by 2015-16. Demand in India for aluminium has picked up as a result of the buoyancy in the industrial sector, especially in the automobile sector.
This points to the need for expansion of capacity to atleast 2 mn tonnes. The existing producers have lined up expansion plans of their present capacities and also to set up greenfield projects in India.
National Aluminium (Nalco), a Government of India undertaking, with a capacity of around 1.6 mn tonnes is the principal producer and exporter of alumina in India. is investing Rs 150 bn in setting up a second greenfield integrated alumina complex in Orissa. The complex will have a 1.5 mn tonne aluminium refinery.
Nalco is also venturing out of India and has planned to set up a smelter in either of the three countries of Oman, Abu Dabi or Qatar owing to the availability of cheap power in these countries. It is also considering setting up an aluminium smelter in the Middle East with an annual capacity of 250,000 to 300,000 tonne. The production capacity of alumina is to be raised to 2.1 mn tonne from 1.6 mn tonnes, bauxite mining from 4.8 mn to 6.3 mn tonnes and power generation from 960 MW to 1200 MW. The plans are expected to be completed by end 2008-09.
Power constitutes 40% to 50% of the cost of production of aluminium, depending on the cost of energy and the efficiency of the smelter. In this respect, Hindalco and Nalco have the benefit of highly cost-effective coal-fired captive power complexes virtually on pitheads. Both the companies, by acquiring coal blocks, reduced their dependence on Coal India to meet their needs.
Hindalco has acquired Talebera I coal block for coal supply to its Hirakud smelter, the capacity of which is being expanded to 146,000 tonne from 65,000 tonne. Besides, it has also identified Talebera II block to meet the power requirement of its proposed 260,000 tonne integrated Aditya Aluminium complex in Orissa. Likewise, Nalco has acquired Utkal E coal block at Talcher for use in the power complex, the capacity of which is to be raised to 1,200 MW to provide energy to its 460,000 tonne smelter.
Hindalco was also buying out its joint venture partner Alcan's 45% holding in Utkal Alumina International (Utkal). Utkal is currently installing a 1.5 mn tonne alumina refinery in Orissa in addition to developing a new bauxite mine. It is the technology provider to some other alumina projects and some of Hindalco.
Hindalco completed acquisition of Novelis, which catapulted the company to the world's largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia. Hindalco sells a third of the 1.2 mn tonne of its production of alumina that it makes.
Hindalco Industries approved amalgamation of its subsidiary, Indian Aluminium Company Ltd (Indal), with itself with effect from April 1, 2007. Hindalco was to invest Rs 300 bn over the next five years for various greenfield and brownfield expansion projects.
Hindalco and Essar was contemplating a joint investment of Rs 77 bn to set up a greenfield aluminium project in Madhya Pradesh. A power project is expected to be a part of the proposed project. The project was to be commissioned by in four phases and negotiations were on with a foreign technology provider. The smelter will have a 325,000 tonne capacity and the captive power project will have 750 MW capacity. The project is endowed with a 3.5 mn tonne captive coal mines for supply of bauxite.
Hindalco proposed to spend Rs 450 bn on its expansion programmes in the next couple of years. Once the envisaged projects materalise, the company's aluminium smelting capacity will increase from 429,000 tonne to 1.5 mn tonne.
Other large projects contemplated by Hindalco include a 325,000 tonne aluminium smelter in Jharkhand, a 260,000 tonne smelter and a mn tonne refinery with a 650 MW power plant in Orissa as part of the Aditya Aluminium project, and a 1.5 mn tonne alumina refinery under the Utkal Alumina project. Brown field projects include the alumina capacity at Muri being raised from 110,000 to 500,000 tonne per annum.
Hindalco may spend about Rs 250 bn over the next 5 years for expanding its capacity in aluminium and copper by as much as three times. Hindalco is scheduled to commission the Aditya Aluminium Project in Orissa by October 2011. The project includes a 1.15 mn tonne aluminia refinery and 3.5 mn tonne aluminium smelter. Hindalco has acquired land for the project and has also obtained environmental clearance for the smelter and the captive power plant and the aluminia refinery.
The public sector company, Balco acquired by Sterilite has been expanded by 245,000 tonne to 350,000 tonne per annum. Vedanta is planning to set up a greenfield aluminium plant in Chhattisgarh at an estimated investment of Rs 100 bn. It has also completed a 1.4 mn tonne capacity project in Orissa.
Vedanta Aluminium (VAL) plans to expand capacity of its existing alumina refinery in Lanjigarh, Orissa, to 6 mn tonne from the current 2 mn tonne at an investment of around Rs 70 bn. The expansion plan comes in the wake of problems the company is facing with regard the securing bauxite linkage of the refinery.
Hit by price crash and economic slowdown, BALCO, a 51% subsidiary of Sterlite Industries, was planning to close one plant which produces 100,000 tonnes of aluminium.
Jindal Aluminium enjoys leadership position in aluminium extrusion industry in India with a 35% market share. Jindal produces 45,000 tpa from its 6 extrusion presses with the capacity of each ranging from 750 to 4000 tonne.
JSW Steel of Jindal group has proposed to set up an alumina refinery in Kutch with an investment of Rs 110 bn. The refinery, in collaboration with Gujarat Mineral Development Corporation aimed at consuming 2 mn tonne of bauxite.
The trend in sales turnover was mixed in 2007-08 while it expanded for most of the companies in 2008-09. The trend in net profit was mixed in 2007-08 while it declined for most of the companies in 2008-09. For major companies like Hindalco, sales increased marginally by around 2% in 2008-09 while that of Nalco expanded by around 16%. For Hindalco, net profit declined by around 13% while that of Nalco declined by around 2%.
Deutsche Bank picked up a 4% stake in Alumeco India Extrusions (earlier know as Pennar Profiles). The Denmark-based aluminium major, Alumeco, had acquired in 2006 Pennar Profiles, to convert the company into a sourcing base for its global needs. Alumeco India is also planning to increase its presence in India by increasing its capacity in downstream aluminium products. Alumeco India has a turnover of around Rs 800 mn. Alumeco's takeover of Pennar Profiles was a part of its rehabilitation package by the Appellate Authority for Industrial and Financial Re-structuring.
The total aluminium foil production in India is placed at around 35,000 tonne, of which Indal and India Foils account for a little over 50%. Indal is the biggest aluminium foil manufacturer in the country. Other major manufacturers include India Foils, Emco, PG Foils and Flex Art. Hindalco also forayed into the segment and managed to capture a sizable share of the market. Its new Silvassa plant in Gujarat has a large capacity of 200,000 tpa. India Foils, now of the Sterlite group, had prepared a five-pronged strategy to bring back the heavily losing company on rails. Hindalco made a bid to acquire India Foils as Sterlite was intending to sell off India Foils.
Domestic demand for aluminium foils in 1999-00 was of the order of 41,000 tonne. It had gone upto 62,000 tonnes by 2003-04 and to 76,700 tonnes in 2006-07. It is projected to reach the level of 100,000 tonne by the end of the decade. Foil users, such as the pharmaceuticals, processed foods and telecommunication sectors, have been showing healthy growth.
Aluminium foil industry is growing annually at around 7%. In the near future, with the phenomenal rise in disposable incomes, the foil industry is expected to receive a boost. Working couples, for instance, increasingly pack their food in aluminium foils. The growth in demand is expected to follow the increasing demand noticed in China.
Total market of aluminium foils was estimated at Rs 20 bn in 2007-08 which meant a rise of around 9% over that of the preceding year. The domestic supplies constituted around 70%.
ALCOA, the world's largest aluminium producer, is entering India in the food packaging segment. The company has struck a marketing pact with a local distributor, Marketing Metrics, for its Reynolds Wrap brand of aluminium foil.