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| India Infoline Sector Reports | Thu, 20-Apr-2006 16:26:18 IST (GMT+5:30) | |
| Aluminium | ||
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Bauxite, alumina and power together constitute 70 % of the total operating costs. Other raw materials used in the manufacturing process are calcined petroleum coke, caustic soda, aluminum flouride, fuel oil/LSHS, steam/coal and anthracite coal. Bauxite Reserves In India (mn ton)
World's Major Bauxite Reserves
Raw materials account for 35% of the cost of production as compared to the global average of 49%. This is due to cheaper availability of abundant reserves of bauxite. The Indian aluminum industry is however plagued with higher cost of power. This along with the higher interest rates has put the industry in a disadvantageous position vis a vis other producers in the world Nalco and Hindalco are the lowest cost producers of aluminum in the world, having their own captive power plants. Indal on the other hand outsourcers its primary metal, which therefore constitutes 42 % of its total operating cost. Bauxite is the basic raw material in the aluminum manufacturing process. Bauxite is converted into alumina in alumina refineries. Bauxite Cost Per Ton Of Alumina
Bauxite was first found in 1821 in a French village Les Baux. Bauxite contains alumina in three different forms - Gibbsite, Boehmit and Monohydrate. Gibbsite is soluble in caustic soda above 100 degree C, while Boehmite and Monohydrate are soluble in caustic soda above 200 degree C. Thus, the treatment of Boehmite and Monohydrate is more expensive than the Gibbsite treatment. India is naturally endowed with large deposits of Gibbsitic bauxite capable of atmospheric or low temperature digestion. India is the sixth largest producer of bauxite and ninth largest producer of alumina in the world. Due to the high quality of bauxite and close proximity between bauxite mines and alumina refineries, the cost of bauxite to Indian producer is one-third the cost to global producers. India's largest captive reserves of bauxite are with Nalco. The company operates a captive mine of 2.4mn ton at Damanjodi. The second largest captive capacity is with Indal with a total capacity of 0.7mn ton at Belgaum and 0.3mn ton at Muri. Hindalco has a captive capacity of 0.7mn ton at Jharkhand. According to the Indian Bureau of Mines of the 183 mines in operation about 173 are in the private sector. There are about 2,000 ton of usable bauxite reserves in India and at the current rate of consumption it is expected to last upto another 250 years. Orissa has 60 % of the total bauxite reserves in India. More than 57 % of the estimated bauxite reserves are in Australia. Brazil and Guinea, while it is almost naturally absent in developed countries like USA, Canada, Europe and Japan Around 95 % of the bauxite produced is used for the production of alumina which in turns is used in primary aluminum production. A comparison of consumption of bauxite required for the conversion into a ton of aluminum suggests that the conversion rate of Hindalco is far superior to that of Nalco. Hindalco on an average converts 5.54 ton of bauxite into 1 ton of aluminum whereas Nalco on the other hand takes more than double the amount to convert bauxite into aluminum. Alumina is a basic feedstock required in aluminum production. Bauxite is refined into alumina hydrate, which in turn is dehydrated in a calciner to obtain calcined alumina. The abundant reserves of bauxite have made India a net exporter of this commodity. Nalco has the largest alumina factory at Damanjodi with a capacity of 0.8mn ton followed by Hindalco's 0.35mn ton capacity and Indal's 0.34mn ton capacity at Belgaum and Muri respectively. Bauxite mining and production during FY96 remained stable at around 5mn ton. However, from 1990 onwards the production and export of alumina in India has been steadily rising. Exports since 1994 have been around 0.48mn ton. Exports of alumina are slated to touch 0.75mn ton in FY99 and 1.22mn ton by FY01. Indian producers are the lowest cost alumina producers in the world. The cost of production of alumina at Nalco is $282/ ton of metal which is 8 % lower than VAW's cost of $330 and 31 % lower than Alcan's cost per ton of alumina. Indian companies are collaborating with their foreign counterparts for the production of alumina as there is a huge demand for alumina from the export sector and it is only natural that Indian companies get into the production of alumina with the expertise of a foreign partner. Alumina approximately sells for Rs16,000-17,000/ton in the domestic market. Electricity Consumed By Major Producers
On an average Indian smelters consumes 15,000 KWH to 16,500 KWH per ton of aluminum as against 14,000 to 14,500 KWH per ton consumed by global smelters. Nalco is the most efficient producer in terms of power consumption. with a consumption of 15,840 KWH per ton On the other hand, the power consumption of Hindalco is to the tune of 16,503 KWH per ton of aluminum. Industrial power tariffs in India are on an average 20 % higher than the tariff in other aluminum producing countries. Power tariff in India is to the tune of 9.7 cents per KWH as against 5 cents per KWH in Canada and 8 cents per KWH in France and 6.05 cents per KWH in the US. In India, the industrial power tariffs are higher as a result of the subsidized power being supplied to the agriculture and consumer segments. Because of the high tariff for power and unreliable power distribution system of the state electricity boards (SEB), which also enjoys a monopoly, all major aluminum manufacturers have captive power generation facilities. There are two advantages of captive power plants. Company is assured of uninterrupted power supply, which is necessary for the production of aluminum. Captive power cost is cheaper (Rs0.8-0.85 per unit) as compared to commercial power which costs around Rs 2.00-2.25 per unit. Nalco operates the largest captive power plant with a capacity of 720 MW. It is also proposing to set up a another 240 MW plant as a part of is two phased modernization program at Angul. Hindalco has its own captive power facilities at its Renusagar power plant. The company has a generating capacity to generate 575 MW of power at Renusagar and another 225MW of power is under implementation The Company is also proposing to set up 650MW of power at its Hirakud smelter in Orissa Calcined petroleum coke (CPC) is used in the manufacture of anodes, a critical item in the electrolysis process to manufacture aluminum. CPC is calcined from raw petroleum coke, which is procured from refineries. Caustic soda is required in both processes ie alumina refinery and aluminum smelting. Aluminum industry is a major consumer of caustic soda accounting for 8 % of the total caustic soda demand. Aluminum fluoride is used as an electrolyte in the electrolytic bath for the conversion of alumina into aluminum. It is normally used along with cryolite. Fuel oil is used both in the alumina plant for conversion into aluminum as well as in the power plant for generating power. Steam coal is used both in the conversion of bauxite into alumina as well as for generation of electricity. Anthracite coke is used for the manufacture of carbon blocks, which are used as a lining in aluminum blast furnaces. Comparable Cost of Aluminum Production
Cost of aluminum production in India is one of the lowest. Cost of production for Nalco and Hindalco is $900/ton and $1060/ton respectively. Hindalco's production cost is slightly higher than Alusaf's production cost of $1026/ton. Alcan and Alcoa the two largest aluminum producers have a production cost of $1113/ton and $1251/ton respectively. Low production cost is attributable to the availability of cheap and good quality bauxite. India has the fifth largest reserves of bauxite in the world and this has been a major boost for the industry. The cost of aluminum production could have been lower if the productivity of manpower had been higher.
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