Nalco may revert to Long Term Contracts for Alumina Export

Business Standard reported that state run producer National Aluminium Company Ltd plans to reboot its strategy on alumina sales in international markets to avoid risking all its surplus alumina in the spot markets, a departure from the previous strategy of clinching long-term contracts with major buyers. With both aluminium and alumina prices subdued, Nalco is contemplating to revive long-term alumina contracts with major global players. A Nalco source said “Hardly 0.3 million tonnes of our surplus alumina in FY19 was liquidated via long-term bilateral pacts. We preferred to sell an overwhelming quantity of alumina in spot markets as prices were on a roll. But given the sobering price trends of alumina, we may do rethink on our strategy and divert more quantum of alumina to long-term sales.”

In the last fiscal year, the navratna company sold over 95 per cent of its exportable alumina in international spot markets as prices had rocketed to over USD 600 per tonne, bringing in windfall gains for the aluminium maker. Riding on buoyant prices, Nalco had clocked its highest ever realisation of over USD 700 per tonne from alumina sales, even bettering the earnings achieved by the company in the heydays of commodity market boom.

The levy of sanctions on U C Rusal by the US treasury and curbs on Norsk Hydro’s Alunorte refinery in Brazil had spooked markets, triggering shortfall in alumina prices. But the lifting of sanctions on U C Rusal and Alunorte, the world’s single largest alumina refining complex en route to its peak rated capacity, has mellowed prices of the intermediate product. On a year-to-date basis, international alumina prices have tumbled by half to around USD 300, crimping margins for Nalco. Notably, Nalco logged a rare quarterly loss of INR 28 crore in Q2 as muted prices eroded profitability.

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