In an interview with ET Now, Mr BL Bagra CMD of NALCO gives his views on the company's performance in 2012 amidst the shortage of coal supply.
ET Now - In September and October, the company had shut down 120 ports out of the 931 that you have owing to severe lack of coal availability. What's the current status?
Mr BL Bagra - The coal supply situation has improved a lot after mid October. In September owing to a lot of disturbances, we had to shut down 120 ports. As the coal supplies have improved, for the last two months we are receiving coal as per the linkage agreement.
But we have not yet started reopening the ports shut down in September as we are building up some stocks. We were left with only two days of consumption stock in September. Now full requirement is being met which we are using for increasing the stocks. Once a stock of 15 to 20 days consumption is reached, we will consider reopening the ports shutdown in September.
ET Now - Do you see further deterioration in margins? The domestic coal supply will continue to be tight, rupee is weak of course and raw materials continue to be high. Is there a cost pressure that you are kind of working to defend?
Mr BL Bagra - Our cost of production is under pressure from various factors. In Q3, due to improved supply from Coal India, there is no pressure on the coal front. Other raw material like fuel oil, furnace oil, which are directly linked to the oil index & the rupee dollar exchange rate, have led to some pressures on the oil & carbon fronts. The cost of production is going up. The improved situation of coal supply will help us. Q3 cost of production will not be more than Q2.
ET Now - Then give us a sense of how do you see the movement of aluminium prices as the street believes that prices will bounce back?
Mr BL Bagra - The prices have been hovering around USD 2000 per tonne for quite some time, which is the bottom. Even at this price, almost 40-45% of the smelting capacity globally is operating at loss.
We have been maintaining that the longer prices remain at the same level, there will be a shut down of inefficient & high cost smelters. In Europe some high cost smelters have been shut down by the producers.
If it continues like this, there will be supply constraint, which will push the prices up. Due to the cost push factor reason, we feel prices will rebound from this level. 2012 will be definitely better than the present price level, which are almost the rock bottom prices.
ET Now - There is news doing the rounds that the company is looking to pick a 25% stake in MEC by March. Any update on that?
Mr BL Bagra - It is related to our proposed power plant and smelter in Indonesia. In fact, the bidder has emerged as the preferred bidder for long-term coal supply agreement. One of the conditions of the bid was that the company may consider to pick up some stake in the coalmine, which the bidder has already offered.
Source - ET Now
