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Nalco Plans Toll-Smelting of Aluminum in Iran
Economy, Business And Markets

Nalco Plans Toll-Smelting of Aluminum in Iran

Taking advantage of cheap gas-generated electricity in the Persian Gulf region, India’s National Aluminum Company plans to go for toll-smelting soon with three Iranian companies to produce aluminum.
Toll manufacturing, also known as toll processing, is an arrangement through which a company (which has a specialized equipment) processes raw materials or semi-finished goods for another company, the Indian newspaper Business Standard reported.
Nalco Chairman TK Chand, who was in Iran recently as part of an Indian business delegation, has already held preliminary discussions in this regard with top officials of the government and state-owned Iranian Mines & Mining Industries Development & Renovation Organization.
“Nalco is exploring the possibilities of toll-smelting in Iran through IRALCO (Iranian Aluminum Company), Al-Mahdi and SALCO. If things work out, the toll-smelting can be done in the next three to four months,” Chand said.
This arrangement, he said, will be a precursor to the proposal to set up a 0.5-million-ton per annum aluminum smelter and 1,000 MW gas-based power complex at Chabahar free trade zone in Iran.
Through toll-smelting, Nalco intends to convert its alumina, currently exported to the international market, to aluminum by paying a tolling fee to the concerned companies.
Nalco annually exports about 1 million tons of alumina. If it is converted to aluminum, the topline of the company would go up significantly as the sale price of aluminum is six times that of alumina.
What has prodded Nalco to go for toll-smelting or an aluminum smelter in Iran is the availability of low-cost power there. Energy cost constitutes nearly 40% of the cost of producing aluminum.
In Odisha, Nalco is sourcing power from its captive generating plant at Rs2.60 per unit.
“The gas-based energy in Iran is available at half this rate,” Chand said.
Nalco and IMIDRO have constituted a joint task force to pursue the greenfield smelter-cum-power complex project at Chabahar Free Trade Zone.
The task force, consisting of senior project executives of Nalco, IRALCO and officials from Iran’s Industries Ministry, is expected to submit a feasibility report on the project in three months.
“This project, to be set up in joint venture, is expected to be highly cost competitive, combining the advantages of low-cost Nalco alumina and low-cost Iranian energy,” Chand said.
Based on the report submitted by the task force, the ownership pattern, project financing, long-term supply of gas and other aspects of the proposed smelter project would be decided.
Nalco had been looking to set up a greenfield smelter at a place where inexpensive energy is available. The company had shortlisted Iran, Indonesia and Oman as possible locations for the overseas smelter.
While it dropped Indonesia on the ground of logistics problems, it has chosen Iran over Oman because of energy cost advantage, sources said.

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