India's second largest aluminium major state-run National Aluminium Co. will reduce its alumina production in its current financial year ending March 2007 on the back of falling alumina prices, company Chairman C R Pradhan told Platts Wednesday.
"We will cut alumina output this year by about 50,000-60,000 mt, mainly because of the low prices," Pradhan said. "We now expect to produce about 1.52-1.53 million mt of alumina by the end of this financial year to March...up to date in September, we have produced about 670,000 mt," he added.
The company had initially planned to produce a full 1.575 million mt of alumina for the year to March 2007. Output in the year ended March 2006 was a higher 1.59 million mt on the back of a stronger alumina market.
Alumina prices have dropped from around $600/mt at the beginning of calendar 2006 to below $300/mt currently.
"Prices are too low, less than $300/mt now. We don't expect it can go much lower because it cannot go below production costs or the plants will have to shut down," Pradhan said. "We expect prices to level around $270-300/mt which would be ideal...even $250/mt would be too low," he added.
Pradhan said Nalco's alumina production cost stood around $120/mt, but most Western producers' costs averaged at $170-200/mt. "The majority are around $200, with some even higher at $300/mt," he said.
No spot tenders planned on low prices
As a result of the lower alumina prices, Nalco has also ceased to offer alumina spot tenders in the immediate term. "We have no more spot tenders planned at the moment because prices are too low. As for one-year contract tenders, the next one is likely to be at the end of the year," Pradhan said.
Nalco last concluded a one-year term contract for 120,000 mt of alumina at end August for the contract year starting from September 2006 to August 2007. The deal was concluded at a price of 11.33% of the average of the London Metal Exchange cash settlement price and the three-month price, for the month prior to the month of delivery, on an FOB Visakhapatnam basis.
The company's last spot tender for alumina for end-August shipment was concluded at $282/mt FOB Visakhapatnam, a sharp decline from an expectation of $322-350/mt FOB. The figure was also a plunge from the spot tender done at $430/mt FOB for end-July shipment.
Aluminium metal output on target; Expansions on track
Meanwhile, Nalco has no plans to reduce its aluminium metal output despite a planned lower alumina production.
"The metal prices are doing well, so our metal output will continue as planned," Pradhan said.
The company, which has a capacity for 345,000 mt/year of aluminium metal, expects to produce 350,000-355,000 mt for the year to March 2007. Output to date in September reached 176,000 mt. Output in the year to March 2006 was 358,955 mt.
Nalco's expansion plans for both aluminium metal and alumina, however, are on track as planned. The company is in the midst of raising its bauxite capacity to 6.3 million mt/year from 4.8 million mt/year, alumina capacity to 2.1 million mt/year from 1.57 million mt/year and aluminium capacity to 460,000 mt/year from 345,000 mt/year.
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