Aluminium sector is not yet ready for green transition: NALCO CMD

NALCO made a record profit in FY25. How has the company performed so far this year?

Our performance in the first half of this financial year was the best ever. In terms of financial performance as well, we have done our best-ever first half compared to FY25. Revenues have increased by around 18-19 per cent, and profits by about 47 per cent.

Up to Q3, we are again seeing the best-ever performance. Financial results for Q3 are yet to be declared, so I will not comment on that, but our expectation is that they will be good. The London Metal Exchange (LME) is supporting us, and metal revenues account for nearly 70 per cent of our total revenues.

If, over the next two to three months, LME prices remain around $2,800–2,900 per metric tonne, we expect our financial performance this year to be close to what we achieved last year.

Has the hike in US tariffs on aluminium impacted NALCO?

NALCO is not directly impacted since we do not export metal or chemicals to the US. Our alumina exports go mainly to the Middle East, Europe, and partly to Southeast Asia, unlike companies such as Vedanta and Hindalco that export directly to the US. If their exports decline and more aluminium is diverted to the domestic market, it can create pricing pressure.

That said, domestic demand in India is strong. Around 40 per cent of aluminium consumption comes from the power sector, 10–12 per cent from infrastructure, and 6–7 per cent from automobiles. Solar power is also driving demand. All these sectors are growing, which is why we are getting good prices in India.

The EU has imposed Carbon Border Adjustment Mechanism (CBAM). How will it impact Indian aluminum exports?

The aluminium sector is not yet ready for green aluminium. Aluminium is a highly power-intensive sector. If power costs rise sharply, the overall cost of aluminium will also increase significantly. It will take sometime.

Aluminium production is energy- and carbon-intensive. What are the decarbonisation measures planned by NALCO?

Nearly 80 per cent of our carbon emissions come from our power plant. If we want to reduce emissions, it is essential to reduce dependence on thermal power and move towards more green power.

We are exploring long-term power purchase agreements with renewable energy producers. We have also engaged a consultant to prepare a comprehensive long-term strategy — whether we should go for solar, wind, hybrid solutions, or solar and wind combined with battery storage.

Our objective is to secure around 200–300 MW of round-the-clock green power out of our current consumption of about 800–900 MW. This would mean 20–30 per cent of our power coming from green sources. This transition is expected to take the next three to four years.

But many RE projects are struggling to sign PPAs…

The problem is that green power is not available round the clock. For aluminium smelting, round-the-clock stable power is essential. Any disruption in power supply has a very serious impact on smelter operations and long-term production.

That is why round-the-clock green power is critical. However, green power combined with battery storage is still expensive, and an immediate solution is not available. This is why we have tasked the consultant with evaluating different mixes — solar with storage, solar and wind, or hybrid models with storage — to identify viable options.

Are you considering nuclear power, now that the government has opened it up for private players?

Nuclear power is highly capital-intensive. Thermal power may cost around Rs 6-7 crore per MW, while nuclear power costs around Rs 30 crore per MW. That is a very large capital requirement, and it would significantly increase power costs and, in turn, aluminium costs.

Moreover, nuclear power is still not fully proven in India at scale. Our competitors in countries like China and Canada rely heavily on hydropower, which is cheap, green, and available round the clock. That gives them a significant advantage.

In India, such large-scale hydropower availability is limited, which is a disadvantage we face, even though hydropower can provide round-the-clock electricity.

NALCO is part of Khanij Bidesh India Ltd (KABIL). How has work on critical minerals been progressing?

NALCO holds a 40 per cent stake in KABIL. In Argentina, we already have three blocks where non-invasive exploration has been completed, and we are now moving towards invasive exploration.

Non-invasive exploration is done from the surface and does not give the full picture. For invasive exploration, we have appointed a consultant, who will in turn appoint a drilling agency. They will carry out drilling, extract actual samples, and conduct detailed exploration. After that, a pilot plant will be set up.

This entire process will take around one to one-and-a-half years. By mid or end-2027, we expect to have the results of the invasive exploration. Based on those results, we will decide whether to move to commercial mining, at what scale, and what kind of commercial mining will be undertaken for lithium.

Lithium availability has already been indicated through exploration, and several nearby mines are operational. We are therefore quite positive that the invasive exploration results will be encouraging.

Is there any plan to enter the domestic critical minerals sector?

Initially, we have not participated in any auctions. However, around one to two months ago, we appointed a bid advisory consultant to carry out due diligence on upcoming auctions. The consultant is examining which mines are coming up for auction and what kind of premium would be viable.

They are keeping a close watch on all auctions. Based on the due diligence, we will take a decision and place it before the board on whether to bid for rare earth elements or other minerals such as magnesium or chromite. We are quite open to entering the domestic critical minerals sector.

What are the challenges that you foresee in the critical minerals sector?

The main challenge in India is exploration. Resources exist, but converting resources into proven reserves requires extensive exploration, which is still lacking.

The level of exploration needs to be significantly improved so that we have a clear picture of how much critical mineral is actually available. Once that clarity is there, more mine auctions can take place.

What are the timelines and financing mix of NALCO’s Rs 30,000 crore expansion plan?

For the Rs 30,000 crore expansion, we are currently in the process of appointing a consultant to prepare a Detailed Project Report (DPR). We expect to finalise the consultant this month itself. The target is to complete the DPR within the next six to seven months and place it before the board for approval by around July or August this year.

Once the board approves the project, the tendering process for the plant will take another six to eight months.

By March or April next year, we should be able to complete tendering and place orders. From that point, it typically takes three to three-and-a-half years to build a plant. Based on our internal roadmap, we expect commissioning by the end of 2030 or early 2031.

This expansion includes a 0.5 million metric tonne smelter along with a 1,080 MW captive power plant.

A smelter cannot operate without a power plant. Aluminium smelting is power-intensive, and we need a captive power plant for stable operations.

The smelter plant will require around Rs 17,000–18,000 crore, while the power plant will require about Rs 12,000 crore. This will increase our capacity to around 1 million metric tonnes from the present 0.46 million metric tonnes.

According to your annual report, domestic aluminium sales have increased in FY25. What is driving this growth?

The increase in domestic sales is mainly because export markets are not offering good prices. We sell exports through a tender process, and when we compared prices, domestic prices were better than those in overseas markets. That is why we consciously increased our presence in the domestic market.

…but NALCO’s aluminium exports have declined sharply in FY25

This is entirely due to pricing. We are not getting good prices in the export market. Therefore, we have taken a conscious decision to keep exports at a minimal level, only to maintain our presence in export markets. It completely depends on the prices we receive.

Even as MSMEs are pushing for easier aluminium scrap imports, large producers are opposing it. What are your views on this?

Currently, imported aluminium scrap attracts a duty of around 2.5 per cent, while imported primary aluminium attracts a duty of around 7.5 per cent. As primary producers, our demand is two-fold.

First, there should be quality standards for imported scrap, because scrap quality is extremely important as it is used in manufacturing aluminium products.

Second, the import duty on scrap should be increased and brought at least on par with that on primary aluminium. We have also requested the government to increase the import duty on aluminium scrap as per with import duty on primary aluminium.

(The writer was in Odisha at the invitation of NALCO)