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India's aluminium demand to continue

India's requirement of aluminium is likely to continue rising annually at a pace much higher than the growth in gross domestic product (GDP) or the economic growth. The government is targeting an annual GDP expansion of nine per cent during the 12th Plan, beginning April 2012. B L Bagra, chairman of the largely government-owned National Aluminium Company (Nalco), finds the environment conducive enough to say the coming many years will see Indian aluminium demand growing at 13-15 per cent a year. No doubt, the major part of demand will come from the electrical sector, as has always been the case with us.
At the same time, more of the metal is finding application in construction, transport and packaging, thanks to growing sophistication of the economy and the spread of urbanisation. The demand surge for aluminium, a lot stronger than for steel in recent years, falls in a global pattern. Stock broking firm Sushil Finance says, “Economies see a strong metal use growth once their per capita GDP on a purchasing power parity basis reaches $3,000.” More recently, this started happening in China when it's per capita GDP on a PPP basis reached $3,195 in 2004. India crossed that magic figure last year. This and the government decision to spend $1 trillion (Rs 45 lakh crore) on infrastructure development during the 12th Plan period will vindicate Bagra's demand forecast. Consultancy firm McKinsey & Co has pegged Indian aluminium demand grow that a more modest 9-11 per cent yearly up to 2015. The Indian per capita use being only 1.3 kg against the world average of 7.4 kg and China's 12 kg shows major growth possibilities of the metal here, as it throws challenges to the local industry to promote new aluminium application. Aluminium use on a large scale is recommended for its durability, light weight, easy maintenance and hygienic properties. For architects, aluminium is fast becoming the design staple for contemporary buildings for all these reasons, as also for its aesthetic appeal. It is interesting how some post-modern sculpture made of aluminium and on a mammoth scale is inspiring our architects to use the metal to give shape to their more creative designs for buildings and their immediate surroundings. “We look up to Anish Kapoor who has used layers and layers of aluminium for his seminal work, Mountain. Similarly, we have discovered a new range of possibilities of aluminium use in the works of Anselm Kiefer,” say Kolkata-based architects Sanjay Mandal and Anirban Bhaduri, who work as a team.

Coal shortage hits Nalco's earnings

Nalco is facing a production loss of about Rs 1 crore per day due to coal shortage. The company plans to scale down production at the plant because of the unavailability of coal from Mahanadi Coalfields Ltd (MCL). The company has cut down its daily production to 1,000 tonnes against the normal rate of output at 1,200 tonnes at the Angul smelter unit in Orissa due to coal shortage. Nalco smelter produces approximately 37,000 tonnes of metal per month and runs on power supplied by captive power plant unit, having a total production capacity of about 1,200 MW.
However, due to less availability of coal, the captive power generation has gone down to about 500-600 MW a day against the normal production rate of 850-860 MW, thereby, affecting the power supply to aluminium smelter. Against the daily requirement of 12,000 tonnes, the company is getting about 7,400-7,500 tonnes of coal per day from MCL for last few weeks, primarily due to heavy rainfall. The company has shut down about 120 pots out of 960 operational pots (of the smelter) to ensure safe operations and unhindered power supply to the remaining pots. Expressing hope that it is a temporary shutdown, a company official said that Nalco has coal stocks of about 90,000 tonnes. Production would be normal soon, if (coal) supplies are restored, the official said.

Tata Metaliks enters into agreement for divestment of redi facilities

As part of the strategic review of its portfolio, Tata Metaliks Board has decided to divest its 300,000 ton pig iron making facility at Redi in Maharashtra with three mini-blast furnaces serving mainly the Western and Southern India markets. The Redi facilities were acquired in 2006 by Tata Metaliks through an auction. Following the acquisition the company undertook several initiatives including refurbishing the Blast Furnaces, create better infrastructure and extensive training of people. However, the structural competitiveness of the facilities was severely affected with the increase in global raw material prices in the last 5 years. While the Company made earnest attempt to secure raw material at the Dongarpal mines in Maharashtra, it is estimated that it would take significant time to commercially mine the iron ore including its quality and suitability for use at Redi.
Following the above, Tata Metaliks has signed an agreement with Fomento Resources Group who has presence in iron ore mining in Goa, Karnataka and Maharashtra for divestment of the Redi facilities as a going concern for a consideration of Rs 180 crores (book value around Rs 114 crores) plus working capital at closing. The above agreement is subject to the shareholders and regulatory approval. The proceeds from the divestment would be utilized for reshaping the Balance Sheet and future strategic investments. The Company would continue to focus its efforts on consolidating its Kharagpur operations and invest in the facilities to make the operations more competitive. The Company will also continue to look at other long term value creating options.

Hindustan Zinc Pays Rs. 425 Crore advance tax for Q2 AY 2012-13

Hindustan Zinc paid Rs 425 crore as second advance tax installment for the FY 2012-13. Hindustan Zinc paid Rs. 250 crore last year for the same period. The company has so far paid Rs. 625 crore as advance tax in the current year. Hindustan Zinc has expanded its zinc-lead production capacity from 204,000 tonnes in 2002 to 964,000 tonnes by 2011. The company is also scheduled to commission its 100,000 lead smelter this year and achieve the distinction to produce over 1 million tonne of metal.
With the expansion of Sindesar Khurd mine, in Rajasthan, which is silver rich mine, Hindustan Zinc is aiming to produce 500 tonnes of silver by March 2012. Taking forward the green energy initiative, Hindustan Zinc is expanding wind power generation to 275 MW by September 2011 to be one of the leading producers of wind energy in India. The wind farms are being commissioned in Rajasthan, Gujarat, Tamil Nadu, Maharashtra and Karnataka. The higher advance tax is attributed to improved efficiency in business operations and expansion in business.

Hindalco likely to delay fund raising for aluminium refinery

Hindalco Industries, the metal products manufacturing arm of the Aditya Birla Group, has decided to delay the financial closure of the Rs 7,800 crore Aditya Aluminium refinery project due to uncertain market conditions. D Bhattacharya, managing director, said the markets were not favourable to raise the money at this point in time. He, however, said work on the project was on and there was no constraint on funds to hold up the project. The debt to equity ratio for the project is 75:25 and the company is using equity for the project. Hindalco had raised $600 million via a QIP issue in 2009 for its expansion plans.
Sunirmal Talukdar, CFO, said the project size for Mahan and Aditya were same and both required the same amount of funding. He said Hindalco will wait for the right opportunity to tap the market. Talukdar said the company had considered several products to raise money and will take a final decision once it decides to go ahead with the financing. He said the company prefers rupee financing with an option to refinance part of the rupee loan with a cheaper ECB, if the opportunity arises. “Normally, we always keep the option of getting a cheaper ECB credit open. This is what we did with the Mahan and Utkal financial closures. We have a comfortable cash balance today, so we are not in a desperate need of money. We want to launch it when the market improves.” The company said the project is expected to be commissioned in 2013. The project includes a 359-kilo tonne per annum aluminium smelter, a 900 Mw captive power plant and an alumina refinery. The company has got the clearances for the 260-ktpa smelter and 600 Mw of power generation.

Weak metal price may hit Sterlite's bottomline

With declining base metal prices on the London Metal Exchange (LME), the stock of Sterlite Industries has lagged the broader market since end-July. The non-ferrous metal major has interests in aluminium, copper, zinc and lead, as well as silver. With fears of a slowing in global growth, prices of most of these metals have fallen, especially in September. Copper is down almost 15 per cent, zinc by 14 per cent and aluminium by 10 per cent and are trading at their 2011 lows. However, given that zinc and lead (along with silver) account for a large portion of the company's profits, and their production is seen rising, analysts say the same will help partly offset the pressure on profits, due to weak metal prices. They say, while the volatility in metal prices may keep the stock under pressure, most concerns seem factored in at current levels. The aluminium segment had already reeled under pressure, with high cost of production on the back of higher coal costs and lack of availability of cheap bauxite for Vedanta Aluminium.
While volumes had remained subdued and margins were under pressure due to firm coal costs, Motilal Oswal Securities estimates combined aluminium volumes from Balco and Vedanta Aluminium at 1,85,000 tonnes to rise seven per cent sequentially in the September quarter. However, strong realisations in the segment during the June quarter had saved the day for Sterlite. High coal costs have also been responsible for rise in power production costs at Sterlite Energy. Its per-unit cost of production was Rs 2.6 in the June quarter against Rs 1.6 per unit during the June 2010 quarter, leading to lower profits. Analysts at ICICI Securities had observed that

Global aluminum market will be worth USD 100 billion in 2011

The aluminum industry is emerging as one of the strongest markets after recession as the commodity is gradually gaining prominence in the recovering transportation and construction industries. The global aluminum market is a steadily growing market which is expected to follow a progressive above average growth rate in developing nations and a modest, steady growth rate in mature markets. Visiongain calculates that the global aluminum market will be worth USD 99.9 billion in 2011. Although the demand for aluminum was negatively impacted during the recession the industry is rapidly picking up owing to the soaring demand of developing Asian economies and rebounding economies of developed nations. China and India are the major contributors to global aluminum production and consumption with other countries including Russia, USA, Australia, Brazil and Norway, making significant contributions to the global growth. Visiongain expects the global metals and mining industry and in particular, the aluminum market to bounce back and demonstrate solid growth in line with previously expected growth rates.
The emerging economies which in total maintained positive growth through the crisis will continue to register strong growth, driving demand for aluminum products in the coming decade. Being the largest aluminum consuming sector, recovery in the transportation industry is yielding good results for the global aluminum market. Contributing further to growth will be the infrastructure development going on at a massive scale in BRIC nations. Moreover, emerging consumer markets are rapidly growing opportunities. Rising GDPs leading to the higher purchasing power of the population will create more demand for automotives, enhanced infrastructure, construction work and other related products which will collectively boost the aluminum industry. Global growth is shifting towards East with Asian and Middle Eastern countries emerging as the most powerful markets. This decade is expected to have the largest production and consumption from the Eastern countries. Saudi Arabia is expected to emerge as a major aluminum exporter with several new smelter projects to start production within 5 years. The region has the abundance of cheap energy for industrial projects. In contrast, China, although self sufficient with alumina reserves, the nation's extensively growing economy offers scope for further exploration. As such, the soaring appetite of China and the promising Middle East aluminum market will benefit the global aluminum industry. Aluminum smelting, being the largest smelting activity in the world, is expected to gain prominence with the growing demand. The aluminum industry is expected to exhibit solid growth mainly driven by gradually recovering markets, economic rebound in aluminum consuming industries, and growing consumer demand for improved aluminum products. The global aluminum industry is also expected to benefit from further refinement of the commodity to enhance its applications in several other sectors.

Guinea and China in talks over bauxite mine and refinery

Guinea is in advanced talks with state owned China Power Investment to develop a bauxite mine and build an alumina refinery, deep water port and a power plant in the West African state. Guinean government sources said that the project which is in Boffa some 120 kilometers west of the capital, Conakry and could begin as soon as 2012 would cost USD 5.8 billion. Guinea already the world's top bauxite exporter is also rich in iron ore and gold and has attracted billions of dollars in investment as it seeks to put decades of misrule behind it. Mr Guillaume Curtis secretary general in the ministry of mines said that "We are indeed in talks with China Power Investment for the construction of an alumina refinery that will have 4 million tonne per year capacity. CPI had completed a first feasibility study on the project, which the government had analyzed.” A source put the project's price tag at USD 5.8 billion and said that CPI would operate in Guinea as CPI International Minerals Investment Corporation. The plan is to open a bauxite mine in the region, build an alumina refinery a deep water port at Bel Air housing for the employees and a coal fired power station with a capacity of 270 MW. Elections last year have led to the restoration of civilian rule although an assassination bid on president Alpha Conde last month underscored simmering tensions. Guinea currently only has one alumina refinery; a 640,000 tonne per year plant at Friguia operated by RUSAL but major mining firms have flocked to the country.

Mongolia seeks bigger stake in Rio, Ivanhoe copper mine

Mongolia wants to increase its stake in one of the world's largest undeveloped copper mines two years after the nation agreed with Rio Tinto Group and Ivanhoe Mines Ltd. to cap government control until 2039. The government is seeking to boost the stake to 50 percent from 34 percent, Dashdorj Zorigt, Mongolia's minerals minister. Such an increase is permitted only after 30 years, according to a summary of the $10 billion project agreement from London-based Rio, which said the new proposal may alarm foreign investors. Mongolia's attempt to renegotiate follows pressure from lawmakers ahead of an election next year and highlights risks for overseas investors as countries seek greater control of raw materials. So-called resource nationalism is the biggest business risk for global mining companies, Ernst & Young LLP said last month. The project, 66 percent owned by Ivanhoe Mines, is half way through completion and will be one of the world's five-biggest copper mines, according to Rio, which controls Oyu Tolgoi's management. Ivanhoe, 48.5 percent owned by Rio, spent more than six years negotiating with Mongolia before reaching an agreement in October 2009 to develop the site, which is scheduled to begin commercial production in 2013. Ivanhoe expects the government of Mongolia to live up to its commitments in the 2009 agreement. Mongolia may also seek to change the allotment of stakes in the Tavan Tolgoi coal deposit to investors including Peabody Energy Corp., the largest U.S. coal producer. The potential ownership changes at the country's two biggest mineral developments come ahead of parliamentary elections next year. Oyu Tolgoi may have average annual output of 450,000 tonnes of copper and 330,000 ounces of gold. World demand for copper will grow 40 percent to 27 million tons by 2020. Rio is facing similar government moves in Mozambique and Guinea, where Rio owns the proposed $10billion Simandou iron ore project in a joint venture with Aluminum Corp. of China. Lawmakers in Guinea on Sept. 9 adopted a mining code that will hand the nation 35 percent of local commodity companies.

    Metallo Chimique orders casting wheel for copper anodes

The Belgian company Metallo Chimique NV in Beerse has placed an order with SMS Meer of Germany for the supply of a complete casting wheel plant for anodes. Metallo Chimique is a producer of secondary copper which is made from scrap.The anode casting wheel is designed for a production of 50 t of anodes per hour. The plant includes a caster newly developed by SMS Meer for minimum weight tolerances. The scope of supply also comprises a system for reducing the thermal load on the molds. This will enable Metallo Chimique to reduce its costs significantly and increase the productivity. Mr Thomas Schatz sales engineer at SMS Meer said that “Our new system for minimizing the thermal load on the casting molds increases the mold service life by up to 20 %. Furthermore less service is necessary.”

Tin smelters in Indonesia halt output

A group of tin smelters in Indonesia, the world's largest exporter, halted production after a plunge in prices prompted mining suppliers to suspend sales of unprocessed ore. Johan Murod, a director at the group of six smelters on Bangka, the main producing island, said that PT Bangka Belitung Timah Sejahtera had to stop buying ore this week as no miners were willing to sell. Indonesian Tin Industry Association is calling on all producers to suspend operations to help prices rebound; According to Rudy Irawan deputy chairman “The price is unreasonable. We will likely restart output if prices return to a profitable level of above USD 23,000 per tonne.” Three month delivery tin fell as much as 14% to USD 17,000 per tonne on the London Metal Exchange, the lowest level since July 2010, leading a slump in base metals.

    Power blackout hits Chile and halts copper mines

A massive power blackout paralyzed crucial copper mines in Chile and darkened vast swaths of the country including the capital Santiago before energy was largely restored. Officials said that the outage acutely exposed the fragility of the energy grid in the world's top copper producer which was devastated by a powerful earthquake in 2010. Critics have blamed Mr Sebastian Pinera president of Chile for under-investment in infrastructure and his popularity ratings have dropped since taking office last year. Prior to the power failure, he was already struggling with massive protests by university students demanding deep educational reforms.
Scrambling engineers were able to fully restore power generation and get distribution up to 90% of normal, the government said after the blackout which lasted a couple of hours in most places. Mr Rodrigo Alvarez energy minister of Chile said that "We've regained power in various regions of the country.”
Mr Alvarez said that the cause of the outage was unknown but that computers that help run the energy grid had also malfunctioned. The blackout primarily hit the center of the country where nearly 10 million of Chile's 16 million people live. Initially, Anglo-American said that its Los Bronces mine was halted and state run Codelco said its Andina division and El Teniente mine were also paralyzed. But Codelco later said power had been restored at the Andina division and El Teniente. It said output was not hurt at Andina as generators were used. Meanwhile, Los Bronces said that it was relying on generators and production was at a third of capacity as normal energy supplies had yet to come on line.

    Chalco net profit in H1 down by 22pct

Aluminum Corporation of China Limited missed forecasts with 22% fall in H1 net profit hit by higher interest costs. Chalco posted a net profit of CNY 413 million compared with a forecast for 678 million in a Reuter's poll. Sales rose 10.4 percent to CNY 66 billion. Finance costs including interest jumped by a sixth to CNY 1.55 billion. It had set aside CNY 273 million for expenditure incurred by its termination of a project to develop bauxite resources in Aurukun, Australia. Analysts said that there has been solid domestic demand this year for aluminum, which is closely tied to economic activity, being widely used in industries from packaging to construction and aviation. They generally forecast a better second half for Chalco on higher aluminum prices but some said additional low cost capacity would start operating in the H2 adding pressure to prices from the Q4. With a high cost aluminum position Chalco has been trying to diversify by commodity and geography. In 2010, Chalco agreed with Rio Tinto Limited to invest USD 1.35 billion for 47% stake in JV to develop the Simandou iron ore project in Guinea. The company has indicated that it could issue additional equity via an A-share placement in Shanghai and a proposed issuance of H-shares in Hong Kong to help fund investment and capital spending. Mr Daniel Kang an analyst at JP Morgan said that "While this may alleviate pressure on its balance sheet it is likely to remain an overhang on the company's A and H shares.”

Energy still Key Driver for Aluminum Production

The location of future aluminum production will continue to be driven by the availability of cheap energy, as researched by senior industry executives. Jean-Philippe Puig, president of primary metal for Europe Middle East and Africa at Rio Tinto Alcan, said the aluminum market continues to face a scarcity of energy and this is making regions like Canada and Iceland--abundant in hydro-electric energy--and the Middle East preferred locations for new smelters. Europe and China are losing out as a result of high energy costs. "The energy issue is getting more and more difficult as the size of smelter projects grows," he said. The first deputy chief executive of United Co. Rusal, Vladislav Soloviev, meanwhile said that cheap energy is key but that there are "not a lot of places in the world that we can find it." Both executives noted rising cost pressures from other raw materials like coke, used to make aluminum. Aluminum is a very intensive production process, accounting for at least a third of total output costs. The executives were speaking at a Metal Bulletin conference in Paris.

METI to support additional equity metals for Japan

Agency for Natural Resources and Energy's director Mr Yuuko Yasunaga of mineral and natural resources division said that the agency tries to secure required metal resources for Japanese industry. The agency of Ministry of Economy, Trade and Industry will support Japanese metal industry while the ministry seeks closer cooperation with Japanese companies. Mr Yasunaga said that the government decided financial support for Caserones copper mining project in July 2010 under the government's target of 80% of equity metal for base metals and 50% of equity metals for rare metals by 2030. With the various projects by Japanese companies, Japanese equity copper will be around 80% of the consumption. He expects Japanese companies will diversify the sources to Canada, Australia, Fiji and Cambodia along with the scale up. He said that Japan should diversify rare earth sources to Vietnam, India, Kazakhstan and Australia for stable procurement. Japan should seek a heavy rare earth resource which is mainly produced in southern part of China, while Japanese companies started the activity to get light rare earth. Mr Yasunaga said that Japan Oil, Gas and Metals National Corporation contributed to Japanese integrated steel makers' participation in world top niobium producer of Companhia Brasileira de Metalurgia e Mineracao of Brazil. He expects JOGMEC can support Japanese industry to get equity of resources including rare metal and rare earth. He said that METI also seeks resource in Africa. The government supports industrialization and education and other life lines along with infrastructure construction while the government tries to secure the resources with cooperation with Japanese companies.

Ivanhoe mines on acquisition target

Ivanhoe Mines Ltd. is on possible acquisition target by the global mining group Rio Tinto Group, its partner in a gold and copper mine in Mongolia, increased its stake in the Canadian company to 49 percent. Ivanhoe owns 66 percent of the Oyu Tolgoi project, one of the world's largest untapped copper deposits. Rio acquired 3.7 million Ivanhoe shares at an average price of C$19.75 ($19.46), boosting its stake by 0.5 percent, London- based Rio said in a statement. The purchase was part of a previous agreement with Ivanhoe that caps Rio's stake at 49 percent. The standstill accord expires on January 18. Alex Terentiew, a Toronto-based analyst at Credit Suisse Group AG, upgraded his recommendation on Ivanhoe to “outperform” from “neutral” as the company continues with development of Oyu Tolgoi. The company expects the government to live up to its commitments in a 2009 agreement that limits Mongolia's stake in the metal deposit until 2039. The investment agreement for the Oyu Tolgoi Project remains a fair and legally binding contract that deserves and requires the unqualified support of all parties.

Hussey Copper files for bankruptcy

Hussey Copper Ltd., a maker of copper products, and five affiliates sought bankruptcy protection from creditors without giving a reason. The company, based 14 miles west of Pittsburgh in Leets dale, Pennsylvania, listed more than $100 million in both assets and debt in Chapter 11 documents filed in U.S. Bankruptcy Court in Wilmington, Delaware. Hussey, which traces its roots back to 1848, calls itself the “leading producer of copper bus bar in the world,” according to its website. The company also makes copper sheet, strip and wiring in addition to the bars used in the manufacture of electrical equipment. Copper for delivery in three months has surged 147 percent since the end of 2008 on the London Metal Exchange (LME), touching a record $10,190 a metric tonne on February 15. Since then, concern that a slowing global economy would curb demand for raw materials has sent prices lower. The metal has dropped 21 percent this year to $7,594 on the LME. The 20 largest unsecured creditors holding claims against the company and its affiliates are owed about $24.6 million, according to court papers. Metal Management Pittsburgh Inc. of Elizabeth, Pennsylvania, is the biggest creditor, owed about $9.1 million, followed by CMC Recycling, owed about $2.7 million and HKP Metals Inc. with a claim of $2.6 million.

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