State-owned aluminium maker Nalco is likely to take a Rs 300-crore hit on annual revenue as it is forced to keep five per cent of production capacity idle due to lower metal price and shortage of coal.

“We kept idle 10 per cent of our total 4.6 lakh smelting capacity due to inadequate coal supply since last November.

Subsequently, half of that was restored in May and the rest five per cent is still idle. This is likely to impact Rs 300 crore to our annual revenue,” a company source said.

The primary reason for keeping the five per cent capacity idle is subdued international price of the metal, which is now hovering at around $1,800-1,850 a tonne. Inadequate supply of coal from domestic sources is also responsible for the plant running at lower than the installed capacity.

Nalco had clocked revenue of Rs 6,611.57 in 2011-12.

“Had there been a good price of the metal in the global markets, we could have run the full capacity, even on imported coal. But since the current London Metal Exchange (LME) price does not support production on imported coal, it is not economical to run the full capacity,” he added.

Nalco would have incurred a loss of Rs 40 crore in the current fiscal, if it had to operate the five per cent idle capacity on imported coal, the source said.

The price of aluminium on the LME is low. It has remained subdued so far in this fiscal due to poor demand from all the user sectors like transport, packaging and construction, which account for nearly 70 per cent of the global 42 million tonne consumption of the metal.

Condensed margins have forced a lot of global aluminium capacity to be put on hold as the price of the metal is on the wane, while the raw material costs are on the rise.

The source, however, said Nalco could have managed to run in its full capacity provided it had received the entire coal requirement domestically. Nalco requires around 18,000 tonnes coal per day to run its plant on 100 per cent capacity.

(This article was published on July 29, 2012)
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