Coal supply not an issue; rains hampering operations: NALCO

In an interview to CNBC-TV18, BL Bagra, chairman and director-finance at NALCO says, the aluminium segment has been lagging. “It has not been contributing in an expected manner. The only reason is that LME prices have stabilised at a very low level, between the band of USD 1,800 and 1,900 per tonne over the last six months,” he elaborates.

He clarifies that the coal availability has not been a problem for the last two quarters. "Since January, the supply of coal has been on expected lines from Coal India’s subsidiary Mahanadi Coalfields. In the Q1, we were very fortunate that we did not have to depend too much on imported coal or expensive coal,” he adds.

For the last two months, he says, particularly July and August, the company is struggling with seasonal problems of rain. "The coal stocks, which are available or which we are receiving, are getting wet due to the heavy rains in catchment areas as well as our plant. So, the problem we are facing right now is not availability or the stock of coal, it is only the wet coal getting chocked in the shoots and in the bunkers," he asserts.

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee.

Q: Your aluminium division expectedly did not do very well because London Metal Exchange (LME) prices have been weak. Can you take us through the pricing trends there?

A: The aluminium segment has been lagging. It has not been contributing in an expected manner. The only reason is that LME prices have stabilised at a very low level, between the band of USD 1,800 and 1,900 per tonne over the last six months. They have been dozing off all the economic logic. Despite some curtailments in the production and few smelters being closed down, the inventories remain at high level. LME prices are not improving.

Though the premium has increased too much as against USD 80-90 till last year and now the premiums are over USD 200, but that shows only the short-term shortage in the ready delivery market. Nevertheless, the LME being at very low level the aluminium segment has been just recovering marginal cost and making a very small contribution towards our fixed cost.

But on the total cost level, the aluminium segment has been a losing segment. But we hope that with these curtailments in the production and the closure of some aluminium smelters in Australia, in Europe and one or two in America, the aluminium prices should now start recovering.