Nalco Likely to Hold Back Iran Smelter Plans

India’s National Aluminum Company is likely to keep in abeyance its plans to put up a greenfield smelter in Iran.

Nalco had planned to establish a 0.5 million-ton per annum smelting facility in Iran, banking on cheaper natural gas supplies.

“Currently, market conditions do not favor us to set up an aluminum smelter in Iran. A new overseas smelter needs substantial investment and we would evaluate all factors before going ahead with the plan. Nalco has domestic commitments as of now and we are going for a ramp-up of our existing smelting unit at Angul,” an unnamed senior Nalco executive was quoted as saying by Indian newspaper Business Standard.

In May, Nalco had signed a memorandum of understanding with Iranian Mines and Mining Industries Development and Renovation Organization to set up an aluminum smelter in Iran.

The signing of the MoU coincided with Indian Prime Minister Narendra Modi’s visit to Iran. The smelter-cum-gas-based power plant was supposed to come up at the Chabahar Free Trade Zone at an estimated cost of $2 billion.

Nalco’s decision to hold back its proposed Iranian smelter project comes after India’s government has asked the company to rethink its overseas expansion plans.

“Value addition should happen in India and we should be self sufficient in aluminum instead of importing by setting up plants overseas,” Mines Secretary Balvinder Kumar told Reuters late September.

Nalco has, however, kept its options open to go for a toll-smelting arrangement with some Iranian companies. Under this proposal, Nalco will divert a portion of its surplus exportable alumina to the Iranian smelters for conversion to aluminum.

Each year, Nalco exports around one ton of surplus alumina. This looked a profitable deal for Nalco since realizations from aluminum sale were up to five times higher than alumina.

Initially, the toll-smelting arrangement was seen as a precursor to Nalco’s larger plans to set up a full-fledged smelter in Iran.

“We had initiated talks with some aluminum smelting firms in Iran for the arrangement. Now, we are awaiting the right price offers for gas supplies from them,” said the Nalco official cited above.