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India Aluminum Giant Mulls $2.6b Plant in Iran
Domestic Economy

India Aluminum Giant Mulls $2.6b Plant in Iran

India's National Aluminum Co Ltd. says it is planning to set up an aluminum smelter and an associated power plant in Iran worth as much as $2.6 billion once the sanctions against the country begin to roll back.

The company’s chairman and managing director, Tapan Kumar Chand said he will meet with India's Foreign Ministry officials and the Iranian ambassador in New Delhi next week to take things forward, Reuters reported.

NALCO is Asia's largest and the world's sixth largest integrated aluminum complex, encompassing bauxite mining, alumina refining, aluminum smelting and casting, power generation, rail and port operations

Chand said he would prefer having an Iranian partner to supply cheap power to run a 1 million ton per annum smelter. The company would source alumina as raw material for the plant from its refinery in the eastern Indian state of Odisha.

NALCO's plans provide further evidence of how business ties are increasing between the two countries.

KIOCL, another Indian state-backed company, last month agreed to sell high-grade iron ore pellets to Iran in a deal potentially worth $200 million annually.

India and Iran had maintained a close relationship despite the trade restrictions imposed by the West over Iran's nuclear energy program. Last month, Iran and six world powers –namely the US, Russia, China, the UK, France and Germany- reached a nuclear deal, clearing the way for an easing of sanctions.

Chand said multi-year-low prices for aluminum due to an oversupply would not be a deterrent to the plans. Any new plant would take 2-3 years to complete and by then demand could improve given the nature of such cyclical industries, he said.

"Generally producers take the opportunity of such downturns to build up their plant capacities, so that as and when demand picks up they are in a position to cater to that," Chand said.

India's per-capita consumption of aluminum is just about 2.2 kilograms, compared with 25 kilograms in China, according to industry data in India. But demand in the country is growing at an annual rate of about 11% against global growth of 6%.

Indian aluminum producers, including NALCO, Vedanta Ltd and Hindalco Industries Ltd, have the capacity to produce 2.9 million tons of aluminum a year. Chand said India's aluminum output was about 2 million tons last fiscal year and could rise to 2.4-2.5 million tons this year.

Aluminium prices are currently under pressure from a supply glut. Benchmark aluminum on the London Metal Exchange, for example, is near its lowest in six years.

NALCO, which has the capacity to produce 2.28 million tons a year of alumina from naturally occurring bauxite, is currently in talks with Indian officials to set up another 1 million ton a year alumina refinery to strengthen its raw material supply chain.

Iran is the 20th largest producer of aluminum in the world. Three major Iranian aluminum companies, namely the Iranian Aluminum Company, Almahdi Aluminum Company and Hormozal produced over 293,595 tons of ingots during March 21, 2014- January 20, 2015.  The figure shows an increase of 893 tons compared with the preceding year’s output, according to data by the Iranian Mines & Mining Industries Development & Renovation Organization.

 

As per the National Vision plan, Iran aims to produce 1.5 million tons of aluminum by 2025. Deputy minister of industries, mining and trade and head of IMIDRO, Mehdi Karbasian said last week that the country’s aluminum production capacity is to reach 900,000 tons in the sixth five-year development plan (2016-2021).

 

Although the terms and conditions of NALCO's venture plans are yet to be discussed, Ever since the deal was reached and corporate giants began the rush to the Iranian market, Iranian authorities have made clear on several occasions that they are primarily interested in high-end investment and joint ventures, not asset grabs.

 

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