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IndustryCom
ment
ICRASectorAnalysis
ICRA
Non- Ferrous Metal
The Indian Aluminium Industry
March 2005
www.icraindia.com
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Industry Comment The Indian Aluminium Industry
Page 2
Contacts:Rajeev Thakur Research HeadAmul Gogna Executive Director
Date March 2005
Copyright, ICRA Limited, 26 Kasturba Gandhi Marg, New Delhi 110 001
None of the information contained in this publication may be copied, otherwise reproduced, repackaged,further transmitted, disseminated, redistributed, or resold, or stored for subsequent use for any such purpose,in whole or in part, in any form or manner or by means whatsoever, by any person without ICRAs prior
written permission.
All information contained herein has been obtained by ICRA from sources believed by it to be accurate andreasonable. Although reasonable care has been taken to ensure that the information herein is true, suchinformation is provided as is without any warranty of any kind, and ICRA in particular, makes norepresentation or warranty, express or implied, as to the accuracy, timeliness or completeness of any suchinformation. All information contained herein must be construed solely as statements of opinion and ICRA
shall not be liable for any losses incurred by users from any use of this publication or its contents.
In the course of work, ICRA may have received information from companies being rated or graded. However,this publication does not contain any confidential information obtained by ICRA in the process of rating orgrading. This publication contains data/information available only in the public domain or available throughsecondary sources.
Opinions expressed in this publication are not an indication of the prospective rating/grading for anyinstruments to be issued by any of the companies concerned.
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Industry Comment The Indian Aluminium Industry
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CONTENTS
INTR ODUCTION ...........................................................................................................4DOME ST IC DE MAN D F OR ALU MI NIU M ...........................................................5
EN D-USER SEGMENTS ......................................................................................................5GROWTH POTENTIAL .......................................................................................................7THREAT OF SUBSTITUTES ...............................................................................................8DEMAND TRENDS AND PROSPECTS IN INDIA ................................................................8
DOM E ST IC SU P P LY OF ALUM INIUM ............................................................. 10INDUSTRY STRUCTURE ..................................................................................................10DOWNWARD INTEGRATION ...........................................................................................11PRIMARY METAL PRODUCERS ......................................................................................11SECONDARY METAL PRODUCERS .................................................................................12ALUMINIUM RECYCLING ...............................................................................................13DOMESTIC P RODUCTION OF ALUMINIUM ....................................................................13ALUMINA SUPPLY...........................................................................................................14BAUXITE M INING ...........................................................................................................15
CO ST OF P R OD UC IN G AL UMI N IUM ............................................................... 17RAW MATERIALS ............................................................................................................17POWER .............................................................................................................................18OTHER CONSUMABLES ..................................................................................................20
P RO F ITABIL ITY OF DO MES TIC ALU MINI UM P RO DUCE RS .............. 21TR E NDS IN AL UMI NIUM P R ICE S ..................................................................... 23
INTERNATIONAL ALUMINIUM T RENDS ........................................................................23DUTY STRUCTURE ..........................................................................................................24DOMESTIC P RICING OF ALUMINIUM ............................................................................25
IMP OR T AND EXP OR T MAR KE TS .................................................................... 27IMPORT MARKETS ...........................................................................................................27EXPORT MARKETS ..........................................................................................................27
OUTLOOK...................................................................................................................... 28AN NE XUR E S ................................................................................................................ 29
ANNEXURE 1 ...................................................................................................................29
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INT R ODUC T I ON
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
hea t an d electricity, non-ma gnetic, non -toxic an d decora tive. Being ma lleable,it can be alloyed with other m etals. The meta l has th e poten tial to substitu te
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 consumerdurables. 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 an d door fra mes for buildings a nd electr ic cables.
Over the last two decades, the global production pattern for aluminium hasundergone extensive regional changes. Although the US is still the largest
primar y producer of aluminium, China is cat ching up fast . Both the count ries
recorded almost equivalent production in 2003. Most of the recent growth in
th e aluminium indust ry ha s emerged from th e developing coun tr ies.
India is an important player in the aluminium sector, especially because of its
abundant bauxite reserves (primary raw material in the production ofaluminium), 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 AluminiumCompa ny Limited (Nalco), tha t In dia becam e a n et export er of alum inium.
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 BirlaGroup (which controls Hindalco Industries Limited and Indal), Sterlite Group
(which controls Bharat Aluminium Company Limited (Balco), and Madras
Alumin ium Compa ny Limited (Malco)) an d Na lco a pu blic sector en ter prise.
These three together account for the majority share of the total domestic
aluminium production.
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D OMESTIC D E MAND F OR AL UMI NI UM
END -USER SEGMENTS
The main end-users of aluminium are the automobile, electrical, packaging,
consumer durables and construction sectors. The main applications of the
meta l in t hese sectors are pr esented in Table 1.
Table 1
Main Appl ica t ions of Alum iniu m
Sector Appl ica t ions
Automotives Pa nelling, floorin g, windows
Electrical Condu ctors, extr us ions , foil wra ps for cablesPa ckaging Can s, cont ain ers , collapsible tu bes, an d foils & closures
for food, tobacco and pharmaceutical products
Consumer Durables White goods, fan s, coolers
Construction Roofing, window frames an d building ha rdwa reCompiled 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 demandin India an d tha t in t he rest of th e world are compar ed in Exhibit 1 .
Exhibi t 1
E n d-Use Pa t t e r n fo r A lum in ium
Compiled byINGRES
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 aluminiummetal output had to be of electrical grade. As a result, there were severeshortages of commercial grade aluminium even as demand for electrical grade
aluminium grew at a sluggish pace.
However, with t he r escinding of cont rols in 1991 an d th e subsequen t growth of
the automotive and construction sectors during the 1990s, the share ofdemand from the electrical sector declined gradually. The sector-wise
aluminium consum ption t rends in India are pr esented in Table 2 below.
World
Automotives29%
Others
18%
Machinery
8%
Electricals
9%
Packaging
18%
Building
18%
End Use Pattern - India
Autos
18%
Building
13% Machinery
6%
Electricals
31%
Packaging
11%
Others
21%
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Table 2
Sector -wise Consu mp t ion of Alumin iu m in In d ia (%age of to t a l )
Se ct or s 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 6Pa ckaging 8 6 8 11 10 11
Building 2 6 7 8 10 13
Ot her s 28 19 21 17 18 21
Total 100 100 100 100 100 100Compiled byINGRES
Electrica l S ector
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 andthermal properties, and can be made to different strength/conductivity
requirem ents for t ra nsm ission a t different volt ages, th us 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 str ipes.
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 andwindows by automotive manufacturers across the globe, but now, it is being
used t o make a ut omotive chassis an d engine. The extensive use of alum inium
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
fra mes ha ve shown better cra sh r esistan ce tha n 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, whilethe 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
th e man ufactu re of ra il wagons a nd coaches in fut ur e.
Bu i ld in g /Co n s t ru c t io n
Aluminium is being used in the building/construction industry because of itsproperties like corrosion resistance, malleability, ductility and strength. The
metal finds extensive use in corrugated sheets (for roofing), butt hinges,
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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 collapsiblebridges, used mainly by the army). Aluminium bridges are of advantage
because of their lower maintenance requirements. Moreover, because of the
higher strength -to-weight r at io of the m etal, th e dimensions of the st ructur alscan be reduced.
P a c k a g i n g
In t he pa ckaging sector, alum inium is used in foils, can s, collapsible tu bes an d
bottle caps. Hence, globally, the growth of the packaging industry hinges on
growth in sectors like foods, beverages, a nd 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 t o grow fast er t ha n t he r est because of its wide use in foodpackaging. 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 t o increas e.
C on s u m e r D u r a b l es
Aluminium , being a th erma l condu ctor, light an d corr osion resista nt , 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 thissector.
GROWTH P O TEN TIA L
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 Bra zil, which is at a similar sta ge 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 tolar ge growth poten tia l for t he sector.
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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 dema nd for a luminium in th e coun tr y.
The domestic consumption of aluminium is expected to grow in the annual
ra nge of 6-8% on t he st ren gth of th e encour aging outlook for t he following end -
user segment s:
Elec t r i ca l s ec to r : 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 significantincreases in capacities. The restructuring of the State Electricity Boards
and the implement at ion of the E lectr icity Act, 2003 would a lso open u p
new opportunities in the areas on power generation, transmission and
supply. The forecast requirement of 100,000 MW of additional generation
capa cities in th e 10th Plan period is likely to tra nslat e into new investmentin power generat ion and distribution.
Automot ives : 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 areexpected t o cont inue dr iving growth in t he a ut omotive sector.
Cons t ruc t ion : 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 Indiawould be th e u pcoming h ighway projects.
C o n s u m e r D u r a b l e s: The medium- to long-term prospects for the Indian
consumer durable industry appear positive, given the combination ofincreasing 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
ha s ma de the a cquisition of dura bles more convenient, and t his ha s been a
ma jor dema nd driver.
P a c k a g i n g : The demand for packaging is expected to increase, given thehealthy growth likely in the pharmaceutical sector. Further, with the
coun tr ys GDP expected t o report a hea lthy growth in t he imm ediate t o
medium term, the consumer spending on foods and beverages is likely to
increase, with th e resu ltan t positive implicat ions for th e packaging sector.
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D OMESTIC SU P P L Y O F AL UMI NI UM
INDUSTRY S TR U C TU R E
The domestic aluminium industry can be divided into two broad categories:
1. Pr ima ry meta l produ cers: Those processing bau xite int o alum inium ingots ,
billets or properzi rods.
2. Secondary fabrication units: Those processing aluminium into rolledproducts, foils, sheets or extr usions.
Exhibit 3 presents th e structure of the Indian a lumi nium indust ry. For details
on t he Man ufactu ring P rocess referAnnexure 1 .
E x h i b i t 3: S t r u c t u r e o f I n d i a n Al u m i n i u m I n d u s t r y
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, asagainst several small downstream manufacturers. Despite being secondary
products, rolled products are largely manufactured in the primary sector on
accoun t of the h igh capita l cost s involved in set tin g up cold /hot rolling m ills.
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DOWNWARD INTEGRATION
Since primary players produce aluminium at much lower costs vis--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 primar y industry has thu s sta rted integrating downwards.
P RIMARY METAL P R O D U C ER S
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
domest ic alum inium indust ry are:
1. Na tional Alum inium Compa ny Limited (Na lco)
2. Hin dalco Indu st ries Limited (Hin dalco)
3. India n Alum inium Compa ny Limited (Inda l)
4. Bha ra t Alum inium Compa ny Limited (Balco)
5. Madr as Alum inium Compa ny Limited (Malco)
E x h i b it 4 : S t r u c t u r e o f P r i m a r y Al u m i n i u m I n d u s t r y o f In d i a
H i g h D e g r e e o f C o n c e n t r a t i o n
The domestic aluminium industry is characterised by a high degree ofconcent ra tion becaus e of th e following rea sons:
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
ma king capacity, and Rs. 4,000/tonn e of cement )
Restr icted a ccess t o techn ology; tie -ups ha ve to be entered in to with globaltechn ology su ppliers.
Entry into the aluminium industry restricted by licensing controls till
1989.
Exhibi t 5
Exhibit 5 presents the percentage
shares of domestic producers in
the total annual production of
aluminium during FY2004.
Hindalco accounts for the highest
sh a re, followed closely by N alco.
S ource: Min istry of Mines, Governm ent of India
Primary Aluminium Industry
Aditya Birla Group Public Sector Undertakings Sterlite Industries
Hindalco Indal Nalco Balco Malco
Share in Total Domestic Primary
Aluminium Production (FY 2004)
Hindalco
39%
Indal
8%
Balco
12%
Malco
4%
Nalco
37%
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The other t hr ee players cum ulat ively ha ve a sha re of ar oun d 25% of th e tota l
domest ic production of aluminium . As In dal is a lso held su bsta nt ially by th e
Aditya Birla Gr oup a long with Hin dalco, almost h alf of th e domestic produce
of aluminium can be a tt ributed to th is group.
SECONDARY METAL P R O D U C ER S
The secondary rollers an d extruders in t he Indian alum inium indust ry eith er
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
cont rol over 70% of the m ar ket for extru sions an d foils.
The secondar y meta l (aluminium ) indust ry in In dia is chara cterised by: L ow e n t r y b a r r i e r s : The barriers are low because of low capital costs and
low dependen ce on t echn ology. The low entr y bar riers, in tu rn , imply keen
compet ition and low capacity ut ilisat ion. H i gh i n p u t c o st : Most of the domest ic production of prim ar y alum inium is
either captively consu m ed or export ed by the prim ar y producers. The
seconda ry players, t her efore, rely hea vily on im port ed alu minium , 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 th e oth er ha nd, have star ted integra ting
downwards to take advantage of the low cost of aluminium that they
produce in h ouse).
The annual production capacities of some of the major domestic secondary
producers ar e presen ted in th e following ta ble.
Table 4: P r oduc t ion Cap ac i ty o f Second ar y Aluminium Pr oducer s in
Domest i c Mark e tP r od uce r Yea r Rod s E x t r u sion s R o lle d
P r o d u c t s
Foi l s Wheels
(000 tonn es) (000 tonn es) (000 tonn es) (000 tonn es) (000 Nos.)
H in da lco 2 00 3-0 4 40.00 13.70 80.00 5.00 3 00 .0 0
Na lco 20 03-04 100 .00 - - - -
Indal 2003-04 - 8.00 90.00 9.00 -
Balco 2003-04 55.75 8.00 43.60 0.60 -
Ma lco 2003-04 36.00 - 3.00 - -
Bh or u ka Alu m in iu m 2003-04 - 6.50 - - -Century Extrusions 2003-04 - 9.00 - - -
Ma h a vir Alu min iu m 2003-04 - 12.40 - - -
Orissa Extrusions 1999-00 - 7.20 - - -
Sangam Aluminium 2000-01 - 7.00 - - -
India Foils 2002-03 - - - 19.00 -
P G F oils 2003-04 - - - 5.00 -
P en nar Alu min iu m 2003-04 14.40 - 30.00 - -Com piled by IN GRES
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As the primary producers account for bulk of the products in domestic
seconda ry mar ket, this ma rket is domina ted by primary producers th emselves.
ALUMINIUM R ECYCLING
Anything made from aluminium can be recycled* to produce the metal again.
In r ecycling alumin ium t o produce seconda ry met al only 5% of the ener gy tha tis needed t o produce the prima ry m eta l is consu med; also, recycling genera tes
only 5% of the greenhouse gas emissions as in primary production. Thus,aluminium scrap or S e c o n d a r y A l u m i n i u m is an important source of
supply for alum inium alloys.Seconda ry a lumin ium is r ecovered from both new
an d old (purchased) scra p.
DOMESTIC P RODUCTION OF ALUMINIUM
Exhibi t 6
The domestic annual
production of aluminiumhas increased at a CAGR
of 8% during FY1999 FY2004, i.e., from 0.54
million tonnes to 0.82
million tonnes. The
production has risen
keeping pace withsurging demand and
increasin g pr ices (referCom piled by IN GRES
Exhibit 6). Consequently, there has been a sharp increase of 18.57% on y-o-y
basis i n pr oduction dur ing FY2004 as compa red with FY2003.
Table 5 A: Alumin ium Pr oduc t ion in Ind ia : Tren ds(in 000 tonn es)
Company Actua l P rodu c t ion
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04
Hin da lco 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
Tota l 545 621 643 639 688 816Compiled byINGRES
* Recycling Process: Scrap is collected and taken to recycling plant s. Th e com position and value of such
scrap is then estim ated. Followin g estimat ion, the scrap is passed through la rge magnets to rem ove any
ferrous metals. S ome furth er processing m ight be required to rem ove any other im purity. T he scrap
aluminium is then loaded into a furnace, which melts the aluminium completely. This molten metal is
then cast or processed, usin g the sam e techn iques as in prim ary processing.
Production - Primary Aluminum (Tonnes)
500,000
600,000
700,000
800,000
900,000
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04
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Table 5 B: Alum iniu m P rod u ct ion in Ind ia : Cap aci ty Ut i li sa t ion (in tonnes)
Capaci ty
(2003-04)
Capac i ty
Ut i l i sa t ion
(2003-04)
Company Location
Hinda lco Renukoot (Sonbhadra , Utt ar Pra desh) 345,000 94%Nalco Angul (Orissa ) 287,500 104%
Indal Alupu ra m (Kera la), Hira kun d (Orissa ) 110,000 63%
Balco Bidhan bag (West Bengal), Korba (Madhya
Pradesh)
100,000 97%
Malco Mettu r Dam (Salem, Tamil Nadu) 40,000 81%
Tota l 882,500 92%Compiled by INGRES
India s pr imar y alum inium production capa city a s at th e 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 int ernat ional dema nd h as encoura ged producers t o raisetheir capacities. For details on the stated future expansion plans of domestic
producers of pri ma ry a luminium refer Table 6.
Table 6: P lann ed Inc r eases in P rodu c t ion Cap ac i ty fo r P r imar y Aluminium (in tonnes)
Company P l a n n e d
Addi t ional
Capac i ty
S t a t u s
Hindalco 15,000 Schedu led to be completed by 2006
Nalco 115,000 Approval obta ined from Cabinet Commit tee on E conomic
Affairs in October 2004. Completion time 50 months.I n d a l 35,000 Relocat ion of pots from Alupu ra m t o Hiraku d at a cost of
Rs. 6 bn. Likely to be on stream by October 2006Balco 250,000 Schedu led to be completed by 2007.
Tota l 415,000 Com piled by IN GRES
ALUMINA SU P P L Y
To produce one tonne of aluminium, around two tonnes of alumina are
required. As status of alumina supply impacts the production capacity ofaluminium in the country, it holds immense importance to the aluminium
industry. Table 7brings out the supply status for alumina in the domesticmarket.
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Table 7: S ta t us of Domest ic Alum ina Sup ply ('000 Tonnes)
Company Locat ion Capaci ty
(2003-04)
P r o d u c t i o n
2002-03
P r o d u c t i o n
2003-04
Capac i ty
Util isat ion(2003-04)
Hinda lco Renukoot (Utt ar
Pradesh)
660 501 591 90%
Nalco Damanjodi (Orissa) 1,575 1,481 1,550 98%
Indal Belgaum (Karna tak a),
Muri (J harkh and)
401 468 492 123%
Balco Korba (Madhya Pradesh) 200 196 203 102%
Malco Chen na i (Tamil Nadu) 80 62 67 84%
Tota l 2,916 2,708 2,903 100%* Estim ated Figures for Balco and Malco com bined
Compiled by INGR ES
The current production of alumina is fairly sufficient to meet the domestic demand
for it. A subs ta nt ial portion of the domest ic alum ina p roduction is exported a s well.
However, given that the domestic alumina industry is currently operating atalmost 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,
th e alum ina producers h ave chosen t o undert ake capa city expan sions in alum ina
instead. Expansion plans of the domestic alumina producers are listed in Table 8
below.
Table 8: P lan ned Inc rea ses in A lum ina P rodu c t ion Capac i t i e s(in tonnes)
Company Plan ned Addi t iona l Capa c i ty Sta tu s
Nalco 525,000 Approval obtained from Pu blic Invest men tBoar d; final a pproval from Cabinet Comm ittee
on Economic Affair s awa ited
Inda l 1,290,000 To be comm issioned by 2007
Sterlite 1,000,000 Pr oject in Orissa for supply to Balco smelter s.Likely to be commissi oned in 2007.
Hin da lco 40,000 Debott lenecking of existin g refiner y. Likely
comm issioning by 2006.
HindalcoUtkalAluminium Project
1,500,000 To be completed in a time-fra me of 36 mont hs
Tota l 4,355,000
Compiled by INGRES
BAUXITE M INING
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 placedat 2,525 MT whereas t he extent of proven a nd pr obable bauxite reser ves is put
Includ es proven, probable and possible bauxite d eposits.
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Industry Comment The Indian Aluminium Industry
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at 1,218 MT. Even at an anticipated consumption of 7 MT per year, these
reser ves would las t for over 350 year s.
About 89% of Indias recoverable bauxite reserves is of metallurgical grade.Orissa, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra and Bihar
are the principal Sta tes where bauxite deposits a re found in th e count ry, with
Orissa a nd Andhra Pra desh a ccount ing for t he 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
capa city rat her th an (bauxite) mining capa city.
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C OS T OF P R ODUC I NG AL UMI NI UM
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 electr olytic redu ction of alum ina to alu miniu m). The key inpu ts inthe manufacturing process are alumina, power and consumables, such as
anodes and caustic soda.
R AW MATERIALS
Bauxite
Indian alum inium pr oducers ar e one of the lowest cost producers of th e met alin 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 andAndh ra Pr adesh , while the bau xite from captive mines (of Hindalco, Balco and
Indal) in Bihar, Madhya Pradesh, Tamil Nadu and Andhra Pradesh contain
15-30% monohydra te a lum ina .
Bauxite deposits a re u sua lly foun d on flat hill rocks, which do not require deepdrilling an d t heir coast al locat ion mak es t he t ran sport at ion economical. There
are 183 bauxite mines under operation in India, of which 173 belong to the
privat e sector. Of th e total r eserves, 89% is of met allur gical gra de.
Alumina
The total installed capacity for the production of alumina in India is nearly
2.90 million tonnes per an nu m (mt pa). Broadly, alum ina can be classified int o:
1. St an dar d alum ina , which is used for th e production of alu miniu m (90%).
2. Special alumina , which is used in n on -met allur gical applicat ions such as
cera mics, insu lat ors an d refra ctories (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
ma inly for capt ive consu mpt ion.
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 a s gibbsitic, boehm itic and diaspore, on t he 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
boehm itic ore is found only in sm all 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.
Th e digestion of bauxit e with caustic soda is influenced by th e min eralogical composition of bauxite.
Gibbsitic baux ite can be digested at tem peratu res of 105-145C at atm ospheric pressure; boehm itic bauxit e
require tem peratures of up to 240C at high or mediu m pressure.
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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 cheaphydr oelectr ic power.
P O W ER
Power is both the major and critical component in the production ofalum inium . This is so becau se:
Smelters are energy intensive, requiring 15,000-18,000 units of power to
ma nufacture one tonne of aluminium.
Smelters are continuous process plants where sudden stoppages have a
serious impa ct on t he cost of p rodu ction.
Exhib i t 7 : E lect r i c ity Con sum pt ion
Source: annual reports of companies.
All domestic aluminium producers have set up captive power plants instead of
relying on comm ercial power, which is both costly a nd er ra tic. While th e power
consumption per tonne of aluminium by smelters worldwide is around 15,000
kWh, the most efficient Indian producer Nalco consumes 14,600 kwh/tonnewherea s H indalco consu mes 16,240 kwh/tonne (refer Exhibit 7). In addition to
high power consumption per unit of production, 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 produ cer of cap tive power (refer Table 9). Their unit power cost are
am ong the lowest in th e Indian Alum inium indust ry.
- 5,000 10,000 15,000 20,000
BALCO
MALCO
NALCO
HINDALCO
INDAL
Electricity Consumption per tonne of
Aluminium (Kwh)
FY2004
FY2003
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Table 9: Average Cos t o f Alumin ium Pr oduc t ion Pe r Uni t o f Power(Rs ./ kwh)
Producer E lec t r i c i ty
P u r c h a s e d
Elect r ic i ty
Genera ted
t h r o u g h
Diesel
G e n e r a t o r
Elect r ic i ty
Genera ted
t h r o u g h
S team
G e n e r a t o r
Avera ge Cost Capt ive
C o n su m p t i o n
as % of Tota l
Consumpt ion
Balco6.38 NA 1.02 1.26 96%
Hindalco4.49 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%Na lco purchases negligible quan tity of electricity for its sm elter at Angul.
Com piled by INGRE S
While most players meet more tha n 90% of their power r equirement th rough
captive plants, Indal still depends on commercial power for more than half of
its total power r equirements. Inda l is ther efore plan ning to expand its captive
power plant to save on power costs. The plans of domestic aluminiumproducers for the expansion of their respective captive power plants are
presented in Ta ble 10.
Table 10 : Capt ive Power P lan t Capa c i t ie s a long wi th P lann ed Inc r eases
Company Capaci ty
(2003-04)
(MW)
Loca t ion P lanned
Addi t ional
Capac i ty(MW)
S t a t u s
Hin da lco 779 Renu koot
(Sonbhadra, Uttar
Pradesh)
41 To be completed in 2006
Nalco 960 Angul (Orissa) 240 Par t of Pha se II expansion
Inda l 167.5 Hir akud (Orissa) 100 To be completed by 2005-06
Balco 270 Korba (Madh yaPradesh)
540 To be completed by 2006.
Malco 75 Mettu r Dam
(Salem, Tamil
Nadu)
Nil NA
Tota l 2251 921Com piled by IN GRES
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O THER C ONSUMABLES
Cau s t i c Soda (NaOH)
Caus tic Soda is used in th e refining of bau xite.
C a l c in e d P e t r o l e u m C o k e (C P C )Calcined Petroleum Coke is used in the electrolysis process to make
alum inium. Around 0.40.5 tonne of CPC is r equired to produce one t onn e
of aluminium. CPC is manufactured by calcination of raw petroleum coke,
which is in t ur n a r efining by-product.
C o a l Ta r P i t c h (C T P )
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 r equired t o produce one t onne of alu miniu m.
Alumin ium F luor ideAluminium fluoride is used as a flux to reduce bath resistivity in the
smelting process. Around 0.20.03 tonne of aluminium fluoride required to
produce one t onn e of alum inium.
F u e l O il
Fuel oil is used both in alumina plants for conversion into aluminium and
in power plan ts t o generat e power.
S t e a m C o a l
Steam coal is used both in the conversion of bauxite into alumina and for
th e genera tion of electr icity.
An t h r a c i t e Co k e
Anthracite coke is used for the manufacture of carbon blocks, which are
used as lining in alum inium blast furn aces.
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P ROF ITABILITY OF D OME S T I C ALUMINIUM P R O D U C E R S
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 th e other h an d, Indian producers h ave higher electr icity 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 powercapacities to lower their costs further. Table 11 and Table 12 below present
the operating an d net m ar gins r eported by domestic alum inium producers
over last six year s.
Table 11 : Opera t ing Marg ins o f Domest i c Alumin iu m P rod ucer s
Company 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99
Hin da lco 37% 34% 42% 46% 45% 44%Nalco 45% 39% 37% 48% 45% 33%
Inda l 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: Ne t Marg ins o f Domest i c Alumin iu m Pr odu cers .
Company 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99
Hin da lco 14% 14% 28% 30% 31% 32%
Nalco 24% 20% 22% 29% 26% 18%
Inda l 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 domesticaluminium industry. Also, Nalco sells over 50% of its total alumina
production, which fetches higher margins as compared with primary
aluminium.
Among oth er pr oducers, Inda ls ma rgins a re lower a s compa red with Hinda lco,Nalco and Malco as Indal meets over 50% of it power requirements through
externa l purcha ses even as th e oth er pr oducers dra w over 90% of their power
requirement s from t heir captive power plant s. Also, Indal ha s lower ma rgins
as it has to procure 20-30% of its total primary aluminium requirements for
downstream products from external sources. Indal is in the process ofincreasing 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
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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 itconsumes the highest power per unit of aluminium production and has high
employee cost s. Dur ing F Y2004, it offered VRS t o its em ployees. Hen ce, th e
employee cost s in FY2005 is expected t o 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
result ed in th e topline a nd bottomline improvement of the Aluminium ma jors
as shown in t he following ta ble.
Ta ble 13: Y-o-Y Grow th for 9 M F Y2005
Hindalco Nalco
Sa les 34% 35%
Operating Profit 21% 71%
Net P rofit 15% 69%
Compiled by INGRES
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T RENDS IN ALUMINIUM P R I C E S
India accounts for just over 3% of the global capacity for aluminium. So, ithardly influences aluminium prices on the London Metal Exchange (LME).
However, prices on the LME do have an effect on domestic prices, since, on theone 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 coststr ucture of Indian a luminium pr oducers.
Compiled by INGRES
INTERNATIONAL ALUMINIUM TR E N D S
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 onLME a veraged US$1759 in F Y2005 (year to dat e till Febru ar y 2005) an d was
highe r by 18% over t he F Y2004 level.
The main factors driving such sharp increase in global aluminium prices have
been the improvement in the global economic outlook, shortage in
international alumina supplies (Asian deficit is approximately 0.3 mn.
tonnes), incremental demand from Asia (particularly China), and a weak US
dollar (which a lso encour aged speculat ion in m eta l mar kets ). In fact, th e meta l
shortage is the Asian region is estimated to be approximately 4 mn. tonnes
and the shor ta ge is expected to increa se fur th er.
World aluminium production kept pace with the increase in global demand
during FY2004, and manufacturers stepped up production to take advantageof the rising prices. Global aluminium supply increased significantly over the
last year.
China is one of the major suppliers of aluminium in the global market
accounting for around 20% of the total global supplies of the metal. However,attempts are being made by the Chinese Government to curb any further
Exhibit 8: Trend in LME prices of
Aluminium (US$/tonne)
12001400
1600
1800
2000
FY19
95
FY19
96
FY19
97
FY19
98
FY19
99
FY20
00
FY20
01
FY20
02
FY20
03
FY20
04
Q1FY
2005
Q2FY
2005
Q3FY
2005
Jan-05
Feb-
05
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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 expansionof existing plant s. It is expected t ha t, becau se of th ese rest rictions on domestic
aluminium production, China may in due course turn into a net importer from
a n et export er, th us caus ing a decline in its supplies of the met al t o the globalmarket.
Despite a decline in supplies from China, the upward trend in global
aluminium supply is expected to continue for some more time. Nevertheless,
capa city const ra ints in alum ina h ave emerged as a cau se for concern. As ma y
be noted from Table 13, world a lumina refineries a re curr ently opera ting a t
97% capacity globally. Thu s, an y significan t increase in a luminiu m productionmay be limited by th e capa city const ra ints in a lumina.
Table 14 : Tren ds in G loba l Alumina Capa c i ty and P r odu c t ion(000 tonn es)
Ye a r C a pa c it y P r o d u ct io n U ti li sa t io n1999 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 Alum inium Institute
DUT Y STR U C TU R E
The custom duty on aluminium has been gradually brought down over theyears a s shown in t he following cha rt.
Exhibi t 9
Trend in Custom Duty on Aluminium
0
5
10
15
20
25
30
35
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
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In the FY2006 budget, the custom duty was reduced from 15% to 10%. This
resulted in th e lowering of the landed cost of aluminium by ar ound Rs.
5000/tonne. The current duty structure for aluminium ores and products is
pres ent ed in th e following ta ble.
Table 15 : Cus tom Du t ie s on Alum inium Or es and P rod uc t s(%)
Basic Custom sD u t y
Counte r va i ling Duty(CVD)**
EffectiveD u t y
Ore (Bauxite) 5 0 5
Unwrought bars and rods,profiles, wires, plat es, sheets ,str ips, tubes, pipes, etc.
10 16 27.6
Waste and scrap 10 16 27.6** Th e CVD rate is the sam e as the excise rate [or the Central Value Ad ded T ax (VAT) rate]
Com piled by IN GRES
Ta ble 16:
Exc i se Dut i e s in Ind ia on Alum inium an d i t s P rodu c t s (%)
The e x c i s e d u t y in India on
aluminium and its products
was very high till FY1993.Subsequently it was reduced
to a uniform 15% in FY1996.
In FY2000, as part of the
process of ra tiona lising excise
duties, the duty onaluminium was increased
marginally to 16%. InFY2001, the excise ra tes wer e Com piled by IN GRES
rationalised for all products across the board to 16%; there have been no
cha nges in th e excise duties since then.
DOMESTIC P RICING OF ALU M IN IU M
Domestic aluminium prices are determined on the basis on landed cost of
imported a lumin ium besides th e cost of production of domest ic producers. The
high import duties on aluminium in India keep the landed cost significantlyabove the international prices. Also, as the gross margin available to domestic
aluminium producers ranges from 10% to 40% (refer the section titledProfitability of Domestic Producers), the domestic prices are somewhat lower
than the landed cost of imported aluminium. Exhibit 9below compares the
movement among domestic and intern at ional a luminium prices since J anu ary2003.
The landed cost of imported aluminium is the total cost that needs to be incurred to import aluminium
includin g all incidental expenses such as ban k charges, freight, insuran ce and labour.
Year Metal Foils Sheets Bars
/rods
Wires
1989 13.6 15.8 15.8 18.9 21.01990 29.2 26.2 15.8 27.3 27.31991 29.2 26.2 15.8 27.3 27.31992 29.0 27.5 16.5 38.5 27.81993 30.3 28.8 17.3 40.2 29.0
1994 25.0 25.0 15.0 25.0 25.01995 20.0 20.0 15.0 20.0 20.01996-98 15.0 15.0 15.0 15.0 15.01999-2004 16.0 16.0 16.0 16.0 16.0
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Exhib i t 10: Compa r i son of Domest i c Alumin iu m P r ices w i th In te rn a t iona l
Al u m i n i u m P r i ce s
Compiled by INGRES
60,000
70,000
80,000
90,000
100,000
110,000
Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04
Rs/Tonn
e
LME Price Landed Cost Domestic Ingot Prices
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IM P O R T AN D E XP ORT MARKETS
IMPORT MARKETS
In 1989, following decontrol of the domestic aluminium industry, imports of
aluminium were permitted under Open General Licence (OGL). Althoughdomestic alum inium production exceeds th e domestic demand, In dia 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. H owever, import s ar e still necessary becau se of th e short age
of domestically produced ingots. Since most domestic primary producers havetheir own downstream capacities, their captive consumption is significantly
high. Thus there is shortage of ingots for standalone secondary producers in
India.
Table 17 : Trend s in Imp or t s o f Alumin ium & Aluminium Pr oduc t s by In d ia(Tonnes)
FY1998 FY1999 F Y2000 F Y2001 F Y2002 FY2003FY2004 Q1 F Y2005
110,959 159,384 144,133 126,021 203,554 192,277 216,787 59,767S ource: Departm ent of Com m erce, Governm ent of India
Table 16 presents the trends in Indian aluminium imports. The country
imported over 0.2 mn . tonnes of alum inium an d aluminium pr oducts during
FY2004. The imports witnessed growth at a CAGR of 11.8% during FY1998-
2004.
EXP ORT 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
witnes sed growth at a CAGR of 7.3% dur ing FY1998 -2004.
Table 18: Tren ds In Exp ort s of Alumin ium & Alumin ium p rod ucts by In dia(Tonnes)
F Y1998 F Y1999 FY2000 FY2001 FY2002 F Y2003 F Y2004 Q1 F Y2005
137,615 71,838 142,079 184,257 191,557 203,803 209,623 40,469S ource: Department of Comm erce, Governm ent of Indi a
Indian aluminium producers have plans to further expand their productioncapa cities (Capacities ma y be increased by 50% in next 5 years ). However, it is
unlikely th at th e domest ic deman d for t he met al would ma tch th e increas e in
production. In such a scenario, Indian producers will thus focus more on
export of the met al.
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O UT L OOK
With th e expecta tion of a healt hy growth in t he coun tr ys 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 theElectricity Act, 2003 is also expected to provide a boost to aluminium demand
eman at ing from t he domestic power sector.
Moreover, India has large untapped demand potential for aluminium, as
evident from t he coun tr ys low per capita consum ption of th e met al. Also, with
th e uses of aluminium increasing, given its versat ility, th e dem an d potent ial is
likely to increase furt her .
Besides the likely increase in domestic demand, Indian producers ofaluminium are also expected to benefit from the likely rise in international
demand for the metal. Already, growth in global demand has outpacedincrease 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
alum ina. The emerging deman d -supply scenar io presen ts good prospects for
domestic producers of aluminium. Given the likely demand situation, almost
all the domestic players have already drawn up major expansion plans. Thescope for s tepping up a luminium supplies in th e Indian a luminium indust ry 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 andaluminium export m arket s.
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ANNEXURES
ANNEXURE 1
M a n u f a c t u r e of A l u m i n i u m a n d A l u m i n i u m P r od u c t s
Aluminium is manufactured by refining bauxite into alumina, which is furtherdissociat ed electrolytically to produce alu min ium. Th e st eps followed a re
discussed in th e following sections.
1. Ex t r a c t ion of bau x i te
Bauxite is the main ore of aluminium. It is actually a rock mixture
consisting mostly of several hydrous aluminium oxide minerals, andimpurities 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 t ran sported t o the refinery. Once th e mining
is finished the topsoil and vegetation are replaced.
2. Ref in ing of ba ux i te in to a lumin a
Bauxite is crushed, ground and then dissolved in caustic soda (sodium
hydr oxide) to form a solut ion of sodium a lum ina te. This solut ion is filter ed
to remove any impurities such as undissolved bauxite residues (generally
referred to as red mud). The solution is put in a precipitator where fineparticles 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 forth e refinin g process.
Ba u x i t e C r u sh e r D ig e st e r P r e c i p i t a t o r
Fi l ter Calc iner A l u m i n a
3. Smel t ing (e lec t ro ly t i c d i s soc ia t ion ) of a lum ina
The Hall -Hr oult P rocess is used in all primar y smelting plan ts in In dia.
Alumina is dissolved in an electrolytic bath of molten cryolite (sodium
aluminium fluoride) in a large carbon or graphite lined steel container
known as a "pot". A high electric current (typically 150,000 amps) is passed
th rough t he electrolyte a t low voltage. The electr ic curren t flows between a
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carbon anode (positive), made of petroleum coke and pitch, and a cathode
(negat ive) form ed by t he th ick car bon or gr aph ite lining of th e pot. Molten
alum inium is deposited at th e bott om of the pot.
There are two main types of smelter technologies: Sderburg and Pre-bake.
The principal difference between the two is the type of anode used. The
Sderbu rg technology uses a cont inu ous an ode which is delivered t o th e 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 attached 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
smelt er technology used globally.
4. S e c on d a r y P r o c e ss in g
Alum inium is processed fur t her into bars, r ods, billets, plates, sheet s, foils,
etc. Aluminium is also alloyed with different metals such as iron, silicon,
zinc, and copper to strengthen or enhance properties. Processes likecasting, rolling, extrusions, forging, welding, and adhesive bonding are
us ed to produce var ious seconda ry products.
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Industry Comment The Indian Aluminium Industry