Vedanta, Nalco could change the way aluminium is used

What has Sohar Aluminium of Oman got to do with India’s silvery white metal industry? A lot. The country’s government-owned National Aluminium Company (Nalco) and its many times bigger private sector counterpart, Vedanta Aluminium, have found inspiration in Sohar Aluminium’s success in running a vibrant aluminium park to build their own parks next to their smelters in Odisha’s Angul and Jharsuguda, respectively. 

That inspiration beside, Odisha Chief Minister Naveen Patnaik has given instructions to the Industrial Infrastructure Development Corporation (IDCO) to ensure that the usual regulatory hurdles and bureaucratic delays do not come in the way of the two proposed parks coming up and then running smoothly.  

Given their capacity to attract investment and generate good numbers of direct and indirect employment and thereby stop migration of job seekers from where the two smelters are to the cities, promotion of aluminium parks is accorded high priority by the Odisha government. In the first phase, the park to be developed by Nalco will have an area of 240 acres. Vedanta will be hosting aluminium based downstream manufacturing units in a bigger field of 250 acres. But this land next to its Jharsuguda smelter will come to Vedanta, subject to the company developing a compensatory forest patch of an identical size.

“With the government wholeheartedly backing the project, finding an alternative land for forest development will not be a hurdle,” says Vedanta Aluminium CEO Abhijit Pati. 

The units to be hosted by an aluminium park will be engaged in making secondary extrusions, wire rods, conductors, cables and foils directly from molten metal. Both Nalco Chairman Tapan Kumar Chand and Vedanta’s Pati have been holding road shows across the country inviting investments in their parks, which should be ready for occupation in eight to 10 months. According to Chand, the major attraction for downstream units in the parks will be the uninterrupted supply of liquid metal from the smelters, sparing them the cost involved in remelting aluminium ingots. 

“An altogether new aluminium ecosystem backed by an efficient infrastructure will get created in the country once aluminium parks start functioning. The most redeeming part of park operation is that it leads to considerable saving of energy,” says Pati. Though it has got nothing do with the proposed park, Vedanta is supplying for some years around 100,000 tonnes of liquid metal from its Jharsuguda smelter to the group cable unit Sterlite. Once the Nalco and Vedanta promoted parks become operational, the carbon footprint of the two companies will fall to a significant extent. 

Talk to any industry officials about aluminium parks, they will invariably refer to the 375,000-tonne Sohar Aluminium, which has reserved over 60 per cent of its molten metal production for use by downstream units in the park adjacent to the smelter. Because of the company’s commitment to make uninterrupted supply of hot metal, a successful producer in the park has come up with capacity to make 160,000 tonnes of multipurpose aluminium sheets. Another thriving venture in the park has built capacity of 60,000 tonnes to make aluminium and alloy rods and overhead transmission line conductors. 

What is generally not discussed here is that China has not been slow either to recognise the cost and environmental benefits that flow from not making ingots and instead give fabricators located next to smelters liquid metal. In the past, many smelters in China’s east moved production base to north and north-east provinces where abundant availability of thermal coal has kept electricity cost low. Aluminium is a highly energy intensive industry where power alone constitutes 35 per cent of total production cost. Left high and dry by smelter migration that made cost of ingot transportation to the east expensive and uncertain during winter months, downstream units there too moved their plant and machinery where smelters were relocated for liquid metal. It proved to be a win-win situation for both constituents of the aluminium industry. According to global commodity research and consulting agency CRU, liquid metal already has the biggest share of Chinese aluminium production ahead of cast house shape products and ingots. This should ideally be a model for India. 

Unlike the Sohar Aluminium park hosting mostly large fabricators, Nalco and Vedanta will pack theirs with medium and small units. 

“In the first phase, the park will have 240 acres, to which will be added another 200 acres in the second phase. We will have some units occupying 20 to 25 acres, but the average land parcel for downstream manufacturing units is likely to be five acres,” says Chand. 

Aluminium parks in the country will hold much promise for start ups and angel investors. First time entrepreneurs will be enthused by park promoters’ commitment to handhold the new units with consultancy, technology and marketing of finished products, says Chand. Nalco will selectively lend its brand name to products to be made at its park. “Whichever enterprise will be given the right to use our brand name for selling its products will have its production process and quality regularly checked by us. To promote investment in our park, we shall be giving an attractive discount on hot metal market price to downstream units,” says Chand. 

If things go as planned, then Nalco park in the second phase will also be housing some “very high tech units to make aluminium products and alloys for application in aerospace and automobile industries. “My strategy is to get technologies from abroad for the purpose, form joint ventures between Nalco and local parties, keep management control with us and once the businesses attain some size, list them on stock exchanges,” says Chand.  

“An altogether new aluminium ecosystem backed by an efficient infrastructure will get created in the country once aluminium parks start functioning” Abhijit Pati CEO, Vedanta Aluminium

“At every step — from hot metal being formed into ingots to their transfer to downstream units where heat is applied to turn ingots into molten metal for making extrusions — there is melt loss of metal and considerable use of electricity. Besides avoiding melt loss, aluminium parks cut logistical cost as there is no transportation of ingots to distant units for value addition. Vedanta Aluminium will supply around 200,000 tonnes of molten metal to its adjacent park,” says Pati. 

As for job creation potential, Chand says  the park will create direct employment for at least 2,000 people. “The thumb rule is each direct employment will create four to five indirect jobs.”

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