- India's National Aluminium Co Ltd (NALCO) wants to set up an aluminium smelter and an associated power plant in Iran worth as much as $2.6 billion, its boss said, once sanctions against the country start to be lifted.
Tapan Kumar Chand will meet with India's foreign ministry officials and the ambassador of Iran in New Delhi next week to take things forward, he said in his first interview since being appointed as the chairman-cum-managing director of NALCO last week.
Chand said he would prefer a local partner who could supply cheap power to run a 1 million tonne per annum smelter in Iran. NALCO 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 U.S.-led trade restrictions over Iran's nuclear programme. Last month, Iran and six world powers reached a nuclear deal, clearing the way for an easing of sanctions on Tehran.
Chand said multi-year-low prices for aluminium 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.
A consultant appointed by NALCO has also shortlisted Oman and Indonesia as destinations where it could set up a smelter. Nothing has been finalised, Chand said.
India's per-capita consumption of aluminium is just about 2.2 kg, compared with 25 kg in China, according to industry data in India. But demand in the country is growing at an annual rate of about 11 percent against global growth of 6 percent.
Chand expects Prime Minister Narendra Modi's plans to expand power transmission networks, build new cities and extend the country's railway network to drive demand growth.
Indian aluminium producers, including NALCO, Vedanta Ltd, and Hindalco Industries Ltd, have the capacity to produce 2.9 million tonnes of aluminium a year. Chand said India's aluminium output was about 2 million tonnes last fiscal year and could rise to 2.4-2.5 million tonnes in the current year.
Aluminium prices are currently under pressure from a supply glut. Benchmark aluminium on the London Metal Exchange, for example, is near its lowest for six years.
NALCO, which also wants to diversify into nuclear power production, is nevertheless looking to strengthen its raw material supply chain.
It expects Odisha to give it a green light for a new bauxite mine in the next few months that will help it to start work on another 1 million tonne per annum alumina plant at a cost of about $867 million.
The company, which has the capacity to produce 2.28 million tonnes a year of alumina from naturally occurring bauxite, is also in talks with officials in Modi's home state of Gujarat to set up another 1 million tonne a year alumina refinery there, Chand said.
"You can't remain at the same place," he said. "If you don't grow, competitors will start growing and you will be squeezed out of the market."