Aluminium 200503

ICRA
ICRA Sector Analysis

Non- Ferrous Metal
The Indian Aluminium Industry
March 2005
Industry Comment
www.icraindia.com
Industry Comment The Indian Aluminium Industry
Contacts:
Rajeev Thakur Research Head
Amul Gogna Executive Director
Date March 2005
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CONTENTS
INTRODUCTION ...........................................................................................................4
DOMESTIC DEMAND FOR ALUMINIUM...........................................................5

END-USER SEGMENTS ......................................................................................................5
GROWTH POTENTIAL .......................................................................................................7
THREAT OF SUBSTITUTES ...............................................................................................8
DEMAND TRENDS AND PROSPECTS IN INDIA ................................................................ 8
DOMESTIC SUPPLY OF ALUMINIUM............................................................. 10
INDUSTRY S TRUCTURE ..................................................................................................10
DOWNWARD INTEGRATION ...........................................................................................11
PRIMARY M ETAL PRODUCERS ......................................................................................11
SECONDARY M ETAL PRODUCERS .................................................................................12
ALUMINIUM RECYCLING ...............................................................................................13
DOMESTIC P RODUCTION OF ALUMINIUM ....................................................................13
ALUMINA SUPPLY...........................................................................................................14
BAUXITE M INING ...........................................................................................................15
COST OF PRODUCING ALUMINIUM ............................................................... 17
RAW MATERIALS ............................................................................................................17
POWER .............................................................................................................................18
OTHER CONSUMABLES ..................................................................................................20
PROFITABILITY OF DOMESTIC ALUMINIUM PRODUCERS.............. 21
TRENDS IN ALUMINIUM PRICES..................................................................... 23

INTERNATIONAL ALUMINIUM T RENDS ........................................................................23
DUTY STRUCTURE..........................................................................................................24
DOMESTIC P RICING OF ALUMINIUM ............................................................................25
IMPORT AND EXPORT MARKETS .................................................................... 27
IMPORT MARKETS ...........................................................................................................27
EXPORT MARKETS ..........................................................................................................27
OUTLOOK...................................................................................................................... 28
ANNEXURES................................................................................................................ 29
ANNEXURE 1 ...................................................................................................................29
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INTRODUCTION
Over the past few decades, aluminium, with its diverse applications, has
established itself as a “wonder metal”. It is light, ductile, a good conductor of
heat and electricity, non-magnetic, non-toxic and decorative. Being malleable,
it can be alloyed with other metals. The metal has the potential to substitute
other conventionally used materials like steel in many applications.
Worldwide, aluminium is used in various sectors, prominent among which are

transportation, packaging, building/construction, electricity and consumer
durables. Primary aluminium is processed further into bars, rods, billets,
plates, sheets, foils, etc. which are used in a variety of products such as air
conditioners, refrigerators, aircraft (structures and engines), automotives
(body parts and engines), bridges, food containers, drink cans, cooking and
packaging foils, window and door frames for buildings and electric cables.
Over the last two decades, the global production pattern for aluminium has
undergone extensive regional changes. Although the US is still the largest
primary producer of aluminium, China is catching up fast. Both the countries
recorded almost equivalent production in 2003. Most of the recent growth in
the aluminium industry has emerged from the developing countries.
India is an important player in the aluminium sector, especially because of its

abundant bauxite reserves (primary raw material in the production of
aluminium), which make the country one of the lowest cost producers of the
metal in the world. India entered the global aluminium industry in 1943
following the establishment of Indian Aluminium Company Limited (Indal).
However, it was only in 1987, with the incorporation of National Aluminium
Company Limited (Nalco), that India became a net exporter of aluminium.
At present, the Indian aluminium industry consists of primary integrated

producers (who procure and process bauxite into aluminium) and secondary
fabrication units (who convert aluminium ingots into rolled/extruded
products). The industry is dominated by three major producers: Aditya Birla
Group (which controls Hindalco Industries Limited and Indal), Sterlite Group
(which controls Bharat Aluminium Company Limited (Balco), and Madras
Aluminium Company Limited (Malco)) and Nalco – a public sector enterprise.
These three together account for the majority share of the total domestic
aluminium production.
Page 4
DOMESTIC D EMAND FOR A LUMINIUM

END -USER SEGMENTS
The main end -users of aluminium are the automobile, electrical, packaging,
consumer durables and construction sectors. The main applications of the
metal in these sectors are presented in Table 1.
Table 1
Main Applications of Aluminium
Sector Applications
Automotives Panelling, flooring, windows
Electrical Conductors, extrusions, foil wraps for cables
Packaging Cans, containers, collapsible tubes, and foils & closures
for food, tobacco and pharmaceutical products
Consumer Durables White goods, fans, coolers
Construction Roofing, window frames and building hardware
Compiled by INGRES
The usage pattern for aluminium in the sectors mentioned is different in India
as compared with the rest of the world. The distribution of aluminium demand
in India and that in the rest of the world are compared in Exhibit 1.
Exhibit 1
End-Use Pattern for Aluminium
End Use Pattern - India World

Others
21% Electricals Others
Electricals
31% 18%
9%
Automotives
29%
Building
Building
13% 18%
Machinery
Packaging Autos Packaging
6% Machinery
11% 18% 18%
8%
Compiled by INGRES
While globally, the automotive and construction sectors are the major end-
users of aluminium, in India, the bulk of the demand is accounted for by the
electrical sector, followed by automotives. The anomaly can be attributed
largely to the Government regulations that were in force till as late as 1991.
According to the Aluminium Control Order, 1970, 50% of the total aluminium
metal output had to be of electrical grade. As a result, there were severe
shortages of commercial grade aluminium even as demand for electrical grade
aluminium grew at a sluggish pace.
However, with the rescinding of controls in 1991 and the subsequent growth of
the automotive and construction sectors during the 1990s, the share of
demand from the electrical sector declined gradually. The sector-wise
aluminium consumption trends in India are presented in Table 2 below.
Page 5
Table 2
Sector-wise Consumption of Aluminium in India (%age of total)
Sectors 1970-71 1980-81 1991-92 1995-96 1999-00 2003-04
Electrical 48 52 37 34 35 31
Automotives 8 11 21 22 21 18
Machinery 6 6 6 8 6 6
Packaging 8 6 8 11 10 11
Building 2 6 7 8 10 13
Others 28 19 21 17 18 21
Total 100 100 100 100 100 100
Compiled by INGRES
Electrical Sector
As discussed, the electrical sector has traditionally accounted for bulk of the
demand for aluminium in India, owing primarily to the Aluminium Control
Order that was in place till 1991. Around 80% of the aluminium demand
emanating from the power sector is accounted for by bare conductors used for
the transmission and distribution of electricity. Since 1984-85, there has been
growing use of aluminium alloy conductors, which have better structural and
thermal properties, and can be made to different strength/conductivity
requirements for transmission at different volt ages, thus leading to lower
losses.
Aluminium is also used in insulated and underground cables laid in large

populated urban areas and in reserved forests (to avoid deforestation). In
addition, the metal finds application in electrical devices such as transformers
and other coil windings, which use paper insulated or enamelled aluminium
wires and stripes.
Automotive Sector
Globally, aluminium is increasingly being used in the automotive sector
because of its high strength-to-weight ratio, which leads to better fuel
efficiency. Traditionally, aluminium has been used for panels, flooring and
windows by automotive manufacturers across the globe, but now, it is being
used to make automotive chassis and engine. The extensive use of aluminium
can result in a weight reduction of up to 300 kg for a medium-sized vehicle
(1,400 kg). Besides, in addition to having light weight, aluminium space
frames have shown better crash resistance than conventional steels.
On an average, world-wide, around 150 kg of aluminium is used in the

manufacture of one car. The corresponding figure for India is only 40 kg at
present; it is however likely to go up in line with the global trend. Also, while
the use of aluminium in rail wagons in India is almost negligible at present,
there is a possibility that aluminium would be used in significant quantities in
the manufacture of rail wagons and coaches in future.
Building/Construction
Aluminium is being used in the building/construction industry because of its
properties like corrosion resistance, malleability, ductility and strength. The
metal finds extensive use in corrugated sheets (for roofing), butt hinges,
Page 6
latches, tower bolts, handles, etc. The high strength to weight ratio of the
metal enables use of aluminium alloy frames in the construction of high-rise
structures. Besides, aluminium is also being used increasingly in the
construction of permanent bridges (so far, it was used for making collapsible
bridges, used mainly by the army). Aluminium bridges are of advantage
because of their lower maintenance requirements. Moreover, because of the
higher strength -to-weight ratio of the metal, the dimensions of the structurals
can be reduced.
Packaging
In the packaging sector, aluminium is used in foils, cans, collapsible tubes and
bottle caps. Hence, globally, the growth of the packaging industry hinges on
growth in sectors like foods, beverages, and medicines.
While the world over, aluminium beverage cans (ABC) account for a
substantial part of the total aluminium consumption, in India, ABC is only a
recent phenomenon. However, carbonated drinks are now increasingly being
packed in ABC in India. Within the packaging industry in India, the foils sub -
segment is expected to grow faster than the rest because of its wide use in food
packaging. The total demand for foils in India is currently at around 50,000 -
55,000 tonnes a year. As public awareness of the advantages of foil use
increases, the demand for aluminium from the packaging sector is also
expected to increase.
Consumer Durables
Aluminium, being a thermal conductor, light and corrosion resistant, is used
in variety of consumer durable items like air conditioners, water coolers,
refrigerators, utensils and pressure cookers. As in the case of automotives, the
global consumer durables sector is also witnessing a trend towards weight
reduction, which points to good prospects for aluminium off -take by this
sector.
GROWTH POTENTIAL
The per capita consumption of aluminium in India is currently at 0.6 kg a
year, which compares poorly with the figures for most developing countries
(refer Table 3), including Brazil, which is at a similar stage of development as
India. The current low consumption of aluminium in the country, besides the
fact that India has the fifth largest bauxite reserves in the world, points to
large growth potential for the sector.
Page 7
Table 3
Per Capita Consumption of Aluminium
Countries Per Capita
Consumption of
Aluminium (in kg.)
Developed Countries (UK, Japan, USA, Germany, France, etc.) 16 - 35
Developing Countries (Argentina, Cameroon, Mexico, Turkey 1–6.6
etc.)
Venezuela 6.4
Thailand 4.0
Malaysia 4.0
Brazil 3.0
China 2.9
India 0.6
Source: Ministry of Mines, Government of India
THREAT OF SUBSTITUTES
Steel, wood and copper are the main substitutes of aluminium. The relatively
low per tonne cost of steel, the higher aesthetic appeal of wood, and the higher
conductivity of copper are some of the major factors favouring the use of these
prime substitutes of aluminium. However, in favour of aluminium are
properties like higher strength-to-weight ratio, durability, and higher
corrosion-resistance. Aluminium also faces strong competition from cheaper
alternatives such as paper (including used and scrap paper), polythene,
thermocol, and cloth in the packaging sector.
D EMAND TRENDS AND PROSPECTS IN INDIA

The total annual consumption of aluminium in India in CY2004 was estimated
at approximately 750,000 tonnes. Exhibit 2 presents the annual domestic
demand for aluminium during the last five years along with the growth
trends.
Exhibit 2: Trends in Domestic Demand for Aluminium

Domestic Demand for Aluminium (Tonnes) Growth in Domestic Demand(YOY)
800,000 20%
750,000 15%
700,000
10%
650,000
5%
600,000
0%
550,000
500,000 -5%
2000 2001 2002 2003 2004E 2001 2002 2003 2004E
Page 8
The domestic demand for aluminium has increased at a compounded annual

growth rate (CAGR) of 6% during FY2000-FY2004. While the growth in
demand on year-on-year (y-o-y) basis was low during FY2001 and FY2002, it
picked up after FY2003. Rising Gross Domestic Product (GDP) growth rate,
and increase in the range of aluminium products have been the main drivers
of this growth in demand for aluminium in the country.
The domestic consumption of aluminium is expected to grow in the annual

range of 6-8% on the strength of the encouraging outlook for the following end -
user segments:
Ø Electrical sector: The power industry is currently characterised by

shortages. Further, the demand for power is expected to continue to
increase over the medium to long term, thus necessitating significant
increases in capacities. The restructuring of the State Electricity Boards
and the implementation of the Electricity Act, 2003 would also open up
new opportunities in the areas on power generation, transmission and
supply. The forecast requirement of 100,000 MW of additional generation
capacities in the 10th Plan period is likely to translate into new investment
in power generation and distribution.
Ø Automotives: Easy availability of low cost finance with longer tenures,

price cuts on the strength of reduction in peak rates of customs duty and
improved rural demand owing to recovery in agriculture sector are
expected to continue driving growth in the automotive sector.
Ø Construction: Housing demand is expected to remain robust because of

enabling factors such as tax relief against interest cost on housing finance,
competitive interest rates and availability of housing finance for duration
as long as 30 years. Further drivers of construction sector growth in India
would be the upcoming highway projects.
Ø Consumer Durables: The medium- to long-term prospects for the Indian

consumer durable industry appear positive, given the combination of
increasing disposable incomes and the trend of reducing prices (owing, in
particular, to a decline in duties and taxes). Further, the availability of
consumer financing schemes from banks and other financial intermediaries
has made the acquisition of durables more convenient, and this has been a
major demand driver.
Ø Packaging: The demand for packaging is expected to increase, given the

healthy growth likely in the pharmaceutical sector. Further, with the
country’s GDP expected to report a healthy growth in the immediate to
medium term, the consumer spending on foods and beverages is likely to
increase, with the resultant positive implications for the packaging sector.
Page 9
DOMESTIC SUPPLY OF A LUMINIUM
INDUSTRY STRUCTURE
The domestic aluminium industry can be divided into two broad categories:
1. Primary metal producers: Those processing bauxite into aluminium ingots,

billets or properzi rods.
2. Secondary fabrication units: Those processing aluminium into rolled

products, foils, sheets or extrusions.
Exhibit 3 presents the structure of the Indian alumi nium industry. For details
on the Manufacturing Process refer Annexure 1.
Exhibit 3: Structure of Indian Aluminium Industry
Compiled by INGRES
Given that production of aluminium (the metal) is a more capital-intensive

activity than fabrication, there are just five large ingot producers in India, as
against several small downstream manufacturers. Despite being secondary
products, rolled products are largely manufactured in the primary sector on
account of the high capital costs involved in setting up cold /hot rolling mills.
Page 10
DOWNWARD INTEGRATION
Since primary players produce aluminium at much lower costs vis-à-vis the
landed cost of imported aluminium that is used by most secondary players, the
margins of primary producers increase if they undertake secondary processing
themselves. The primary industry has thus started integrating downwards.
PRIMARY METAL PRODUCERS

The primary aluminium industry in India is concentrated in three business
groups i.e., the Aditya Birla Group, Sterlite Industries and Public Sector
Undertakings (refer Exhibit 4). The five primary metal producers in the
domestic aluminium industry are:
1. National Aluminium Company Limited (Nalco)
2. Hindalco Industries Limited (Hindalco)
3. Indian Aluminium Company Limited (Indal)
4. Bharat Aluminium Company Limited (Balco)
5. Madras Aluminium Company Limited (Malco)
Exhibit 4: Structure of Primary Aluminium Industry of India

Primary Aluminium Industry
Aditya Birla Group Public Sector Undertakings Sterlite Industries
Hindalco Indal Nalco Balco Malco
High Degree of Concentration

The domestic aluminium industry is characterised by a high degree of
concentration because of the following reasons:
• High capital costs because of large plant sizes (150-200,000 tonnes per
annum smelters) and high capital intensity (Rs. 100,000/tonne of
aluminium capacity as compared with Rs. 30,000/tonne of integrated steel
making capacity, and Rs. 4,000/tonne of cement)
• Restricted access to technology; tie -ups have to be entered into with global
technology suppliers.
• Entry into the aluminium industry restricted by licensing controls till
1989.
Exhibit 5
Share in Total Domestic Primary Exhibit 5 presents the percentage
Aluminium Production (FY 2004)
shares of domestic producers in
Malco
Balco
12% 4% the total annual production of
Indal
8%
Hindalco
39%
aluminium during FY2004.
Hindalco accounts for the highest
Nalco
share, followed closely by Nalco.
37%
Source: Ministry of Mines, Government of India
Page 11
The other three players cumulatively have a share of around 25% of the total
domestic production of aluminium. As Indal is also held substantially by the
Aditya Birla Group along with Hindalco, almost half of the domestic produce
of aluminium can be attributed to this group.
SECONDARY METAL PRODUCERS

The secondary rollers and extruders in the Indian aluminium industry either
purchase the primary metal (billets and blooms) from domestic producers or
import the same and process the metal at their own fabrication plants into
semi- or fully -fabricated products. Such secondary metal producers include
India Foils, Pennar Aluminium, and Century Extrusions, which together
control over 70% of the market for extrusions and foils.
The secondary metal (aluminium) industry in India is characterised by:

• Low entry barriers: The barriers are low because of low capital costs and
low dependence on technology. The low entry barriers, in turn, imply keen
competition and low capacity utilisation.
• High input cost: Most of the domestic production of primary aluminium is
either captively consum ed or exported by the primary producers. The
secondary players, therefore, rely heavily on imported aluminium, which is
expensive because of the high import duties. In fact, the high landed costs
of primary aluminium exert great pressure on the margins of secondary
producers (primary producers, on the other hand, have started integrating
downwards to take advantage of the low cost of aluminium that they
produce in house).
The annual production capacities of some of the major domestic secondary

producers are presented in the following table.
Table 4: Production Capacity of Secondary Aluminium Producers in

Domestic Market
Producer Year Rods Extrusions Rolled Foils Wheels
Products
(’000 tonnes) (’000 tonnes) (’000 tonnes) (’000 tonnes) (’000 Nos.)
Hindalco 2003-04 40.00 13.70 80.00 5.00 300.00
Nalco 2003-04 100.00 - - - -
Indal 2003-04 - 8.00 90.00 9.00 -
Balco 2003-04 55.75 8.00 43.60 0.60 -
Malco 2003-04 36.00 - 3.00 - -
Bhoruka Aluminium 2003-04 - 6.50 - - -
Century Extrusions 2003-04 - 9.00 - - -
Mahavir Aluminium 2003-04 - 12.40 - - -
Orissa Extrusions 1999-00 - 7.20 - - -
Sangam Aluminium 2000-01 - 7.00 - - -
India Foils 2002-03 - - - 19.00 -
P G Foils 2003-04 - - - 5.00 -
Pennar Aluminium 2003-04 14.40 - 30.00 - -
Compiled by INGRES
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As the primary producers account for bulk of the products in domestic

secondary market, this market is dominated by primary producers themselves.
ALUMINIUM RECYCLING
Anything made from aluminium can be recycled* to produce the metal again.
In recycling aluminium to produce secondary metal only 5% of the energy that
is needed to produce the primary metal is consumed; also, recycling generates
only 5% of the greenhouse gas emissions as in primary production. Thus,
aluminium scrap or “Secondary Aluminium” is an important source of
supply for aluminium alloys. Secondary aluminium is recovered from both new
and old (purchased) scrap.
DOMESTIC PRODUCTION OF ALUMINIUM

Exhibit 6
The domestic annual
Production - Primary Aluminum (Tonnes) production of aluminium
900,000
has increased at a CAGR
800,000 of 8% during FY1999 –
FY2004, i.e., from 0.54
700,000 million tonnes to 0.82
million tonnes. The
600,000 production has risen
keeping pace with
500,000
surging demand and
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04
increasing prices (refer
Compiled by INGRES
Exhibit 6). Consequently, there has been a sharp increase of 18.57% on y-o-y
basis i n production during FY2004 as compared with FY2003.
Table 5 A: Aluminium Production in India: Trends

(in ’000 tonnes)
Company Actual Production
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04
Hindalco 239 251 253 263 266 323
Nalco 146 213 230 232 245 298
Indal 42 43 44 44 50 65
Balco 92 95 87 70 96 97
Malco 25 19 29 29 31 33
Total 545 621 643 639 688 816
Compiled by INGRES
* Recycling Process: Scrap is collected and taken to recycling plants. The composition and value of such
scrap is then estimated. Following estimation, the scrap is passed through large magnets to remove any
ferrous metals. Some further processing might be required to remove any other impurity. The scrap
aluminium is then loaded into a furnace, which melts the aluminium completely. This molten metal is
then cast or processed, using the same techniques as in primary processing.
Page 13
Table 5 B: Aluminium Production in India: Capacity Utilisation

(in tonnes)
Company Location Capacity Capacity
(2003-04) Utilisation
(2003-04)
Hindalco Renukoot (Sonbhadra, Uttar Pradesh) 345,000 94%

Nalco Angul (Orissa) 287,500 104%
Indal Alupuram (Kerala), Hirakund (Orissa) 110,000 63%
Balco Bidhanbag (West Bengal), Korba (Madhya 100,000 97%
Pradesh)
Malco Mettur Dam (Salem, Tamil Nadu) 40,000 81%
Total 882,500 92%
Compiled by INGRES
India’s primary aluminium production capacity as at the end of FY2004 stood

at around 0.9 million tonnes and the actual production at 0.8 million tonnes.
The industry is currently operating at 92% of its rated capacity. The increase
in both domestic and international demand has encouraged producers to raise
their capacities. For details on the stated future expansion plans of domestic
producers of pri mary aluminium refer Table 6.
Table 6: Planned Increases in Production Capacity for Primary Aluminium

(in tonnes)
Company Planned Status
Additional
Capacity
Hindalco 15,000 Scheduled to be completed by 2006
Nalco 115,000 Approval obtained from Cabinet Committee on Economic
Affairs in October 2004. Completion time 50 months.
Indal 35,000 Relocation of pots from Alupuram to Hirakud at a cost of
Rs. 6 bn. Likely to be on stream by October 2006
Balco 250,000 Scheduled to be completed by 2007.
Total 415,000
Compiled by INGRES
ALUMINA SUPPLY
To produce one tonne of aluminium, around two tonnes of alumina are
required. As status of alumina supply impacts the production capacity of
aluminium in the country, it holds immense importance to the aluminium
industry. Table 7 brings out the supply status for alumina in the domestic
market.
Page 14
Table 7: Status of Domestic Alumina Supply

('000 Tonnes)
Company Location Capacity Production Production Capacity
(2003-04) 2002-03 2003-04 Utilisation
(2003-04)
Hindalco Renukoot (Uttar 660 501 591 90%
Pradesh)
Nalco Damanjodi (Orissa) 1,575 1,481 1,550 98%
Indal Belgaum (Karnataka), 401 468 492 123%
Muri (Jharkhand)
Balco Korba (Madhya Pradesh) 200 196 203 102%
Malco Chennai (Tamil Nadu) 80 62 67 84%
Total 2,916 2,708 2,903 100%
* Estimated Figures for Balco and Malco combined
Compiled by INGRES
The current production of alumina is fairly sufficient to meet the domestic demand
for it. A substantial portion of the domestic alumina production is exported as well.
However, given that the domestic alumina industry is currently operating at
almost 100% capacity, the likely rise in aluminium production is expected to exert
pressure on alumina supply as well. The domestic producers have the option to
limit alumina exports and divert the same to meet their aluminium production
requirements. However as margins are healthy in the export market for alumina,
the alumina producers have chosen to undertake capacity expansions in alumina
instead. Expansion plans of the domestic alumina producers are listed in Table 8
below.
Table 8: Planned Increases in Alumina Production Capacities

(in tonnes)
Company Planned Additional Capacity Status
Nalco 525,000 Approval obtained from Public Investment

Board; final approval from Cabinet Committee
on Economic Affairs awaited
Indal 1,290,000 To be commissioned by 2007
Sterlite 1,000,000 Project in Orissa for supply to Balco smelters.
Likely to be commissi oned in 2007.
Hindalco 40,000 Debottlenecking of existing refinery. Likely
commissioning by 2006.
Hindalco—Utkal 1,500,000 To be completed in a time-frame of 36 months
Aluminium Project
Total 4,355,000
Compiled by INGRES
BAUXITE MINING
India has large high-grade bauxite deposits of around 3,037 million tonnes†
(MT), which places the country in the 5th position globally; after Australia,
Guinea, Brazil and Jamaica, in that order. The recoverable reserves are placed
at 2,525 MT whereas the extent of proven and probable bauxite reserves is put
† Includes proven, probable and possible bauxite deposits.

Page 15
at 1,218 MT. Even at an anticipated consumption of 7 MT per year, these

reserves would last for over 350 years.
About 89% of India’s recoverable bauxite reserves is of metallurgical grade.

Orissa, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra and Bihar
are the principal States where bauxite deposits are found in the country, with
Orissa and Andhra Pradesh accounting for the bulk of it.
While India has 7.5% of the world's total bauxite deposits, it accounts for just
3% of the global aluminium capacity, which in fact points to significant
potential for capacity additions (to meet both domestic and export demand
over the long term). In other words, there are no major bauxite supply
constraints in India, and aluminium production is more a function of smelter
capacity rather than (bauxite) mining capacity.
Page 16
COST OF P RODUCING A LUMINIUM
The two technologies commonly used for aluminium production are the Bayer
process (for the production of alumina from bauxite) and the Hall-Heroult
process (for electrolytic reduction of alumina to aluminium). The key inputs in
the manufacturing process are alumina, power and consumables, such as
anodes and caustic soda.
RAW MATERIALS
Bauxite
Indian aluminium producers are one of the lowest cost producers of the metal
in the world. The average cost of bauxite production in India is US$5 per
tonne as against the world average of US$20-25 per tonne. Around 80% of
Indian bauxite is highly gibbsitic (i.e. with over 40% alumina) with very low
reactive silica, which allows production of low-cost alumina with the use of the
appropriate technology. Gibbsitic bauxite is found mainly in Orissa and
Andhra Pradesh, while the bauxite from captive mines (of Hindalco, Balco and
Indal) in Bihar, Madhya Pradesh, Tamil Nadu and Andhra Pradesh contain
15-30% monohydrate alumina ‡.
Bauxite deposits are usually found on flat hill rocks, which do not require deep
drilling and their coastal location makes the transportation economical. There
are 183 bauxite mines under operation in India, of which 173 belong to the
private sector. Of the total reserves, 89% is of metallurgical grade.
Alumina
The total installed capacity for the production of alumina in India is nearly
2.90 million tonnes per annum (mtpa). Broadly, alumina can be classified into:
1. Standard alumina, which is used for the production of aluminium (90%).
2. Special alumina, which is used in non-metallurgical applications such as
ceramics, insulators and refractories (10%).
Nalco is one of the five leading exporters of alumina worldwide. Indal also
exports alumina, mainly because of its relatively low aluminium capacity. The
other domestic producers, namely, Hindalco, Malco and Balco, use alumina
mainly for captive consumption.
While till the 1960s, alumina refineries used to be located near smelters,
currently the refineries are close to bauxite mines. This shift has been
‡ Bauxite deposits can be classified broadly as gibbsitic, boehmitic and diaspore, on the basis of their
structural composition. Gibbsitic bauxite is the relatively low concentrate ore, while the other two are
comparatively richer. However, of the bauxite ores mined, the gibbsitic variety is most abundant, whereas
boehmitic ore is found only in small traces, which renders its extraction less economic. Around 80% of
Indian bauxite contains alumina in the gibbsite form, which requires less power for further processing.
The digestion of bauxite with caustic soda is influenced by the mineralogical composition of bauxite.
Gibbsitic bauxite can be digested at temperatures of 105-145°C at atmospheric pressure; boehmitic bauxite
require temperatures of up to 240°C at high or medium pressure.
Page 17
prompted mainly by rising transportation and energy costs, besides the need
for refining plants to have long-term contracts with mines (the refineries are
usually designed for bauxite of specific composition). The smelters, on the
other hand, are located near sources of continuous and relatively cheap
hydroelectric power.
POWER
Power is both the major and critical component in the production of
aluminium. This is so because:
• Smelters are energy intensive, requiring 15,000-18,000 units of power to
manufacture one tonne of aluminium.
• Smelters are continuous process plants where sudden stoppages have a
serious impact on the cost of production.
Exhibit 7: Electricity Consumption
Electricity Consumption per tonne of

Aluminium (Kwh)
INDAL
HINDALCO
NALCO FY2004
MALCO FY2003
BALCO
- 5,000 10,000 15,000 20,000
Source: annual reports of companies.
All domestic aluminium producers have set up captive power plants instead of
relying on commercial power, which is both costly and erratic. While the power
consumption per tonne of aluminium by smelters worldwide is around 15,000
kWh, the most efficient Indian producer Nalco consumes 14,600 kwh/tonne
whereas Hindalco consumes 16,240 kwh/tonne (refer Exhibit 7). In addition to
high power consumption per unit of pro duction, the unit cost of commercial
power in India is, on an average, almost 20% higher than that for the rest of
the world. Of the major players, Nalco and Hindalco are among the most
efficient producer of captive power (refer Table 9). Their unit power cost are
among the lowest in the Indian Aluminium industry.
Page 18
Table 9: Average Cost of Aluminium Production Per Unit of Power

(Rs./ kwh)
Producer Electricity Electricity Electricity Average Cost Captive
PurchasedGenerated Generated Consumption
through through as % of Total
Diesel Steam Consumption
Generator Generator
Balco
6.38 NA 1.02 1.26 96%
Hindalco
4.49 6.76 1.01 1.06 99%
Indal
2.82 6.13 1.20 2.21 41%
Malco
31.86 NA 1.44 1.67 99%
Nalco
3.27 NA 1.01 1.01 100%
Nalco purchases negligible quantity of electricity for its smelter at Angul.
Compiled by INGRES
While most players meet more than 90% of their power requirement through
captive plants, Indal still depends on commercial power for more than half of
its total power requirements. Indal is therefore planning to expand its captive
power plant to save on power costs. The plans of domestic aluminium
producers for the expansion of their respective captive power plants are
presented in Table 10.
Table 10: Captive Power Plant Capacities along with Planned Increases
Company Capacity Location Planned Status
(2003-04) Additional
(MW) Capacity
(MW)
Hindalco 779 Renukoot 41 To be completed in 2006
(Sonbhadra, Uttar
Pradesh)
Nalco 960 Angul (Orissa) 240 Part of Phase II expansion
Indal 167.5 Hirakud (Orissa) 100 To be completed by 2005-06
Balco 270 Korba (Madhya 540 To be completed by 2006.
Pradesh)
Malco 75 Mettur Dam Nil NA

(Salem, Tamil
Nadu)
Total 2251 921
Compiled by INGRES
Page 19
O THER C ONSUMABLES
• Caustic Soda (NaOH)
Caustic Soda is used in the refining of bauxite.
• Calcined Petroleum Coke (CPC)

Calcined Petroleum Coke is used in the electrolysis process to make
aluminium. Around 0.4–0.5 tonne of CPC is required to produce one tonne
of aluminium. CPC is manufactured by calcination of raw petroleum coke,
which is in turn a refining by-product.
• Coal Tar Pitch (CTP)

Coal Tar Pitch is used in the electrolysis process to rejuvenate pre-baked
and soderberg anodes as they get used up in the smelting process. Around
0.1– 0.2 tonne of CTP is required to produce one tonne of aluminium.
• Aluminium Fluoride
Aluminium fluoride is used as a flux to reduce bath resistivity in the
smelting process. Around 0.2–0.03 tonne of aluminium fluoride required to
produce one tonne of aluminium.
• Fuel Oil
Fuel oil is used both in alumina plants for conversion into aluminium and
in power plants to generate power.
• Steam Coal
Steam coal is used both in the conversion of bauxite into alumina and for
the generation of electricity.
• Anthracite Coke
Anthracite coke is used for the manufacture of carbon blocks, which are
used as lining in aluminium blast furnaces.
Page 20
PROFITABILITY OF DOMESTIC A LUMINIUM P RODUCERS
As discussed earlier, production costs for Indian aluminium manufacturers

are among the lowest in the world. Bauxite mining costs are lower in the
country by global comparison because of the abundance of bauxite reserves,
the favourable location of such reserves, and the availability of cheap labour.
However, on the other hand, Indian producers have higher electricity costs as
compared with their global counterparts. But on the whole, the lower cost of
ore for Indian aluminium players more than compensates for their higher
power cost. Moreover, domestic producers are developing captive power
capacities to lower their costs further. Table 11 and Table 12 below present
the operating and net margins reported by domestic aluminium producers
over last six years.
Table 11: Operating Margins of Domestic Aluminium Producers

Company 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99
Hindalco 37% 34% 42% 46% 45% 44%
Nalco 45% 39% 37% 48% 45% 33%
Indal 16% 12% 14% 16% 16% 16%
Balco 8% 11% -1% -3% 12% 14%
Malco 23% 28% 21% 26% 29% 24%
Compiled by INGRES
Table 12: Net Margins of Domestic Aluminium Producers.

Company 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99
Hindalco 14% 14% 28% 30% 31% 32%
Nalco 24% 20% 22% 29% 26% 18%
Indal 8% 6% 8% 10% 9% 7%
Balco 8% 8% 3% -2% 7% 10%
Malco 12% 12% 6% 11% 8% 21%
Compiled by INGRES
Nalco, with its most efficient aluminium smelter among all domestic
producers, has the highest operating margins in the industry. Its mines have
richer bauxite reserves as compared with those of its counterparts. Moreover,
Nalco consumes least power per unit of aluminium production in the domestic
aluminium industry. Also, Nalco sells over 50% of its total alumina
production, which fetches higher margins as compared with primary
aluminium.
Among other producers, Indal’s margins are lower as compared with Hindalco,
Nalco and Malco as Indal meets over 50% of it power requirements through
external purchases even as the other producers draw over 90% of their power
requirements from their captive power plants. Also, Indal has lower margins
as it has to procure 20-30% of its total primary aluminium requirements for
downstream products from external sources. Indal is in the process of
increasing its captive power capacity by 100 MW (project to be completed by
2005-06) so as to lower its production cost. It also plans to increase its
smelting capacity by 35,000 tonnes by 2005 (by relocating the pots from
Page 21
Alupuram to Hirakud at an outlay of Rs. 6 bn.) to meet its downstream

requirements.
Balco has the lowest margins among all domestic producers because it
consumes the highest power per unit of aluminium production and has high
employee costs. During FY2004, it offered VRS to its employees. Hence, the
employee costs in FY2005 is expected to be lower.
During 9M FY2005, the domestic demand for aluminium increased by over

10% and the production was higher by approximately 6%. Strong metal prices
resulted in the topline and bottomline improvement of the Aluminium majors
as shown in the following table.
Table 13: Y-o-Y Growth for 9 M FY2005

Hindalco Nalco
Sales 34% 35%
Operating Profit 21% 71%
Net Profit 15% 69%
Compiled by INGRES
Page 22
TRENDS IN A LUMINIUM P RICES
India accounts for just over 3% of the global capacity for aluminium. So, it
hardly influences aluminium prices on the London Metal Exchange (LME).
However, prices on the LME do have an effect on domestic prices, since, on the
one hand, they determine the margins of Indian exporters and, on the other,
influence the landed price of imported metal. However, the correlation is
limited because of the duty protection against imports and the low cost
structure of Indian aluminium producers.
Exhibit 8: Trend in LME prices of

Aluminium (US$/tonne)
2000
1800
1600
1400
1200
FY 95
FY 96
FY 97
FY 98
FY 99
FY 00
FY 01
FY 02
FY 03
FY 0 4
F 05
FY 05
Ja 5
Fe 5
05
0
0
19
19
19
19
19
20
20
20
20
Q1 2 0
Q2 20
Q3 Y20
20
n-
b-
FY
Compiled by INGRES
INTERNATIONAL ALUMINIUM TRENDS

Internationally, aluminium prices have witnessed a sharp increase since
September 2003 following a surge in global aluminium demand. Exhibit 8
presents the movement of aluminium prices on LME. Aluminium prices on
LME averaged US$1759 in FY2005 (year to date till February 2005) and was
higher by 18% over the FY2004 level.
The main factors driving such sharp increase in global aluminium prices have
been the improvement in the global economic outlook, shortage in
international alumina supplies (Asian deficit is approximately 0.3 mn.
tonnes), incremental demand from Asia (particularly China), and a weak US
dollar (which also encouraged speculation in metal markets). In fact, the metal
shortage is the Asian region is estimated to be approximately 4 mn. tonnes
and the sho rtage is expected to increase further.
World aluminium production kept pace with the increase in global demand
during FY2004, and manufacturers stepped up production to take advantage
of the rising prices. Global aluminium supply increased significantly over the
last year.
China is one of the major suppliers of aluminium in the global market

accounting for around 20% of the total global supplies of the metal. However,
attempts are being made by the Chinese Government to curb any further
Page 23
investment in some of its heavy industries. The State Development and

Reform Commission of China issued circulars in March 2004 banning any
investment in the construction of new steel, aluminium and cement plant
across the country. These circulars have also set restrictions on the expansion
of existing plants. It is expected that, because of these restrictions on domestic
aluminium production, China may in due course turn into a net importer from
a net exporter, thus causing a decline in its supplies of the metal to the global
market.
Despite a decline in supplies from China, the upward trend in global

aluminium supply is expected to continue for some more time. Nevertheless,
capacity constraints in alumina have emerged as a cause for concern. As may
be noted from Table 13, world alumina refineries are currently operating at
97% capacity globally. Thus, any significant increase in aluminium production
may be limited by the capacity constraints in alumina.
Table 14: Trends in Global Alumina Capacity and Production

(’000 tonnes)
Year Capacity Production Utilisation
1999 48,490 45,784 94%
2000 51,424 48,119 94%
2001 53,305 48,488 91%
2002 53,532 49,785 93%
2003 55,298 52,555 95%
2004 56,466 54,872 97%
Source: International Aluminium Institute
DUTY STRUCTURE
The custom duty on aluminium has been gradually brought down over the
years as shown in the following chart
.
Exhibit 9
Trend in Custom Duty on Aluminium
35
30
25
20
15
10
0
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Page 24
In the FY2006 budget, the custom duty was reduced from 15% to 10%. This
resulted in the lowering of the landed cost of aluminium by ar ound Rs.
5000/tonne. The current duty structure for aluminium ores and products is
presented in the following table.
Table 15: Custom Duties on Aluminium Ores and Products

(%)
Basic Customs Countervailing Duty Effective
Duty (CVD)** Duty
Ore (Bauxite) 5 0 5
Unwrought bars and rods, 10 16 27.6
profiles, wires, plates, sheets,
strips, tubes, pipes, etc.
Waste and scrap 10 16 27.6
** The CVD rate is the same as the excise rate [or the Central Value Added Tax (VAT) rate]
Compiled by INGRES
Table 16:
Excise Duties in India on Aluminium and its Products (%)
The excise duty in India on Year Metal Foils Sheets Bars Wires
aluminium and its products /rods
was very high till FY1993. 1989 1990
13.6
29.2
15.8 15.8
26.2 15.8
18.9
27.3
21.0
27.3
Subsequently it was reduced 1991 29.2 26.2 15.8 27.3 27.3
to a uniform 15% in FY1996. 1992 29.0 27.5 16.5 38.5 27.8
In FY2000, as part of the 1993 30.3 28.8 17.3 40.2 29.0
1994 25.0 25.0 15.0 25.0 25.0
process of rationalising excise 1995 20.0 20.0 15.0 20.0 20.0
duties, the duty on 1996-98 15.0 15.0 15.0 15.0 15.0
aluminium was increased 1999-2004 16.0 16.0 16.0 16.0 16.0
marginally to 16%. In
FY2001, the excise rates were Compiled by INGRES
rationalised for all products across the board to 16%; there have been no
changes in the excise duties since then.
DOMESTIC PRICING OF ALUMINIUM

Domestic aluminium prices are determined on the basis on landed cost§ of
imported aluminium besides the cost of production of domestic producers. The
high import duties on aluminium in India keep the landed cost significantly
above the international prices. Also, as the gross margin available to domestic
aluminium producers ranges from 10% to 40% (refer the section titled
“Profitability of Domestic Producers”), the domestic prices are somewhat lower
than the landed cost of imported alumini um. Exhibit 9 below compares the
movement among domestic and international aluminium prices since January
2003.
§ The landed cost of imported aluminium is the total cost that needs to be incurred to import aluminium
including all incidental expenses such as bank charges, freight, insurance and labour.
Page 25
Exhibit 10: Comparison of Domestic Aluminium Prices with International

Aluminium Prices
110,000
100,000
Rs/Tonne
90,000
80,000
70,000
60,000
Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04
LME Price Landed Cost Domestic Ingot Prices
Compiled by INGRES
Page 26
IMPORT AND E XPORT MARKETS
IMPORT MARKETS
In 1989, following decontrol of the domestic aluminium industry, imports of
aluminium were permitted under Open General Licence (OGL). Although
domestic aluminium production exceeds the domestic demand, India imports
an average 15-20% of the total domestic supply of aluminium. Moreover, the
net landed price of the imported metal exceeds domestic prices by Rs 10,000 -
15,000 per tonne. However, imports are still necessary because of the shortage
of domestically produced ingots. Since most domestic primary producers have
their own downstream capacities, their captive consumption is significantly
high. Thus there is shortage of ingots for standalone secondary producers in
India.
Table 17: Trends in Imports of Aluminium & Aluminium Products by India

(Tonnes)
FY1998 FY1999 FY2000FY2001 FY2002 FY2003FY2004 Q1 FY2005
110,959 159,384 144,133 126,021 203,554 192,277 216,787 59,767
Source: Department of Commerce, Government of India
Table 16 presents the trends in Indian aluminium imports. The country

imported over 0.2 mn. tonnes of aluminium and aluminium products during
FY2004. The imports witnessed growth at a CAGR of 11.8% during FY1998 -
2004.
EXPORT MARKETS
India has been exporting a considerable part of its aluminium production.
Since the Indian producers are among the least cost producers of the metal,
they have a global cost advantage. Hence, aluminium is exported at profitable
margins. For trends in aluminium exports by India refer Table 17. The exports
witnessed growth at a CAGR of 7.3% during FY1998 -2004.
Table 18: Trends In Exports of Aluminium & Aluminium products by India

(Tonnes)
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 Q1 FY2005
137,615 71,838 142,079 184,257 191,557 203,803 209,623 40,469
Source: Department of Commerce, Government of Indi a
Indian aluminium producers have plans to further expand their production

capacities (Capacities may be increased by 50% in next 5 years). However, it is
unlikely that the domestic demand for the metal would match the increase in
production. In such a scenario, Indian producers will thus focus more on
export of the metal.
Page 27
OUTLOOK
With the expectation of a healthy growth in the country’s GDP, domestic
demand for aluminium is likely to increase. Thus, the outlook for the
aluminium industry remains positive for the near future. The sectors that are
likely to drive the expected increase in aluminium demand include
construction, automotives and consumer durables. The enactment of the
Electricity Act, 2003 is also expected to provide a boost to aluminium demand
emanating from the domestic power sector.
Moreover, India has large untapped demand potential for aluminium, as

evident from the country’s low per capita consumption of the metal. Also, with
the uses of aluminium increasing, given its versatility, the demand potential is
likely to increase further.
Besides the likely increase in domestic demand, Indian producers of

aluminium are also expected to benefit from the likely rise in international
demand for the metal. Already, growth in global demand has outpaced
increase in aluminium supplies even as fresh requirements, especially from
the American and Chinese economies, are set to push up the demand levels
further.
On the supply side, the main constraint is the limited global capacity for
alumina. The emerging demand -supply scenario presents good prospects for
domestic producers of aluminium. Given the likely demand situation, almost
all the domestic players have already drawn up major expansion plans. The
scope for stepping up aluminium supplies in the Indian aluminium industry is
significant (as opposed to the situation globally), given the abundance of
bauxite reserves in the country and the adequacy of production capacities.
Also, Indian manufacturers are among the lowest cost producers of aluminium
in the world. The country is thus placed favourably both in the alumina and
aluminium export markets.
Page 28
ANNEXURES
ANNEXURE 1
Manufacture of Aluminium and Aluminium Products
Aluminium is manufactured by refining bauxite into alumina, which is further
dissociat ed electrolytically to produce aluminium. The steps followed are
discussed in the following sections.
1. Extraction of bauxite
Bauxite is the main ore of aluminium. It is actually a rock mixture

consisting mostly of several hydrous aluminium oxide minerals, and
impurities such as quartz, clay minerals, and iron hydroxides. Bauxite
deposits (found mainly in tropical and subtropical areas) are found in the
form of strata or "pockets", typically around 4-6 metres thick under a
shallow covering of topsoil and vegetation.
Bauxite is generally extracted by open cast mining. The topsoil is taken

away and samples of vegetation carefully preserved and reinstated later.
The bauxite is removed, and transported to the refinery. Once the mining
is finished the topsoil and vegetation are replaced.
2. Refining of bauxite into alumina
Bauxite is crushed, ground and then dissolved in caustic soda (sodium

hydroxide) to form a solution of sodium aluminate. This solution is filtered
to remove any impurities such as undissolved bauxite residues (generally
referred to as “red mud”). The solution is put in a precipitator where fine
particles of alumina are added to seed the precipitation of pure alumina
particles as the liquor cools. It is then passed through a calciner at very
high temperature to remove chemically combined water. This produces a
white powder called alumina. The residual caustic soda can be reused for
the refining process.
Bauxite Crusher Digester Precipitator
Filter Calciner Alumina
3. Smelting (electrolytic dissociation) of alumina
The Hall -Héroult Process is used in all primary smelting plants in India.
Alumina is dissolved in an electrolytic bath of molten cryolite (sodium

aluminium fluoride) in a large carbon or graphite lined steel contai ner
known as a "pot". A high electric current (typically 150,000 amps) is passed
through the electrolyte at low voltage. The electric current flows between a
Page 29
carbon anode (positive), made of petroleum coke and pitch, and a cathode
(negative) formed by the thick carbon or graphite lining of the pot. Molten
aluminium is deposited at the bottom of the pot.
There are two main types of smelter technologies: Söderburg and Pre-bake.
The principal difference between the two is the type of anode used. The
Söderburg technology uses a continuous anode which is delivered to the cell
(pot) in the form of a paste, which bakes in the cell itself. Pre-bake
technology, on the other hand, uses multiple anodes in each cell, which are
pre-baked in a separate facility and attac hed to "rods" that suspend the
anodes in the cell. New anodes are exchanged for spent anodes ("anode
butts"). At present, Pre-bake technology accounts for over 70% of the
smelter technology used globally.
4. Secondary Processing
Aluminium is processed furt her into bars, rods, billets, plates, sheets, foils,
etc. Aluminium is also alloyed with different metals such as iron, silicon,
zinc, and copper to strengthen or enhance properties. Processes like
casting, rolling, extrusions, forging, welding, and adhesive bonding are
used to produce various secondary products.
Page 30
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ICRA

ICRA Sector Analysis

Date March 2005

DOMESTIC DEMAND FOR ALUMINIUM...........................................................5

TRENDS IN ALUMINIUM PRICES..................................................................... 23

Worldwide, aluminium is used in various sectors, prominent among which are

India is an important player in the aluminium sector, especially because of its

At present, the Indian aluminium industry consists of primary integrated

DOMESTIC D EMAND FOR A LUMINIUM

End Use Pattern - India World

Aluminium is also used in insulated and underground cables laid in large

On an average, world-wide, around 150 kg of aluminium is used in the

D EMAND TRENDS AND PROSPECTS IN INDIA

Exhibit 2: Trends in Domestic Demand for Aluminium

The domestic demand for aluminium has increased at a compounded annual

The domestic consumption of aluminium is expected to grow in the annual

Ø Electrical sector: The power industry is currently characterised by

Ø Automotives: Easy availability of low cost finance with longer tenures,

Ø Construction: Housing demand is expected to remain robust because of

Ø Consumer Durables: The medium- to long-term prospects for the Indian

Ø Packaging: The demand for packaging is expected to increase, given the

DOMESTIC SUPPLY OF A LUMINIUM

1. Primary metal producers: Those processing bauxite into aluminium ingots,

2. Secondary fabrication units: Those processing aluminium into rolled

Exhibit 3: Structure of Indian Aluminium Industry

Given that production of aluminium (the metal) is a more capital-intensive

PRIMARY METAL PRODUCERS

Exhibit 4: Structure of Primary Aluminium Industry of India

Aditya Birla Group Public Sector Undertakings Sterlite Industries

Hindalco Indal Nalco Balco Malco

High Degree of Concentration

Source: Ministry of Mines, Government of India

SECONDARY METAL PRODUCERS

The secondary metal (aluminium) industry in India is characterised by:

The annual production capacities of some of the major domestic secondary

Table 4: Production Capacity of Secondary Aluminium Producers in

As the primary producers account for bulk of the products in domestic

DOMESTIC PRODUCTION OF ALUMINIUM

Table 5 A: Aluminium Production in India: Trends

Table 5 B: Aluminium Production in India: Capacity Utilisation

Hindalco Renukoot (Sonbhadra, Uttar Pradesh) 345,000 94%

India’s primary aluminium production capacity as at the end of FY2004 stood

Table 6: Planned Increases in Production Capacity for Primary Aluminium

Table 7: Status of Domestic Alumina Supply

Table 8: Planned Increases in Alumina Production Capacities

Nalco 525,000 Approval obtained from Public Investment

† Includes proven, probable and possible bauxite deposits.

at 1,218 MT. Even at an anticipated consumption of 7 MT per year, these

About 89% of India’s recoverable bauxite reserves is of metallurgical grade.

COST OF P RODUCING A LUMINIUM

Exhibit 7: Electricity Consumption

Electricity Consumption per tonne of

- 5,000 10,000 15,000 20,000

Source: annual reports of companies.

Table 9: Average Cost of Aluminium Production Per Unit of Power

Malco 75 Mettur Dam Nil NA

• Calcined Petroleum Coke (CPC)

• Coal Tar Pitch (CTP)

PROFITABILITY OF DOMESTIC A LUMINIUM P RODUCERS

As discussed earlier, production costs for Indian aluminium manufacturers

Table 11: Operating Margins of Domestic Aluminium Producers

Table 12: Net Margins of Domestic Aluminium Producers.

Alupuram to Hirakud at an outlay of Rs. 6 bn.) to meet its downstream