Where
strategy counts
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A business model defines how a business will
operate and in large part dictates the level
of success it can hope to achieve.
Hindalco has adopted totally integrated business
model in the case of aluminium business.
The “integrated” model is used by
large companies to leverage on their size,
their power in multiple aspects of the industry
and their dominating position across the value
chain.
Hindalco Industries Limited has long been
a leading integrated producer of aluminium,
among the industry’s top companies across
Asia. The aluminium operation extends from
mining of bauxite to the production of not
only primary aluminium but also the value
added downstream products such as flat rolled
products (FRP), extrusions and also customised
consumer products such as foils.
The objective is to play optimally in the
aluminium value chain balancing between the
more volatile high margins upstream products
and the steadier low margins downstream portfolio.
The golden Indian vantage
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Hindalco's upstream strategies for the aluminium
industry focuses on continuing existing low
cost operations and progressing on new greenfield
projects; that will further improve cost competitiveness
through lowest production costs; by controlling
key resources, such as bauxite mines, refineries,
power plants and coal; and reaping benefits
of economies of scale. We also maintain our
focus on sustainable development.
Indian bauxite is of the highest quality —
it is Gibbsitic bauxite with high alumina
content, less than 2 per cent Boehmite content,
a very low reactive silica content and negligible
organic content. It has higher liquor purity
and productivity, which is more cost efficient.
Also, in India, large deposits of bauxite
can be found in a single plateau, allowing
for more efficient extraction. India also
has abundant coal supplies, easy availability
of labour and is located in close proximity
to the fast-growing markets.
Captive bauxite mines that provide the highest
quality bauxite and a refinery located near
the mine, state-of-the-art technology and
economies of scale further enhance our cost
advantage.
Aluminium is a power intensive industry. One
tonne of aluminium requires over 15,000 Kwh
of power. Power constitutes almost 40 per
cent of the total cost of production. Low
cost, uninterrupted power is absolutely vital
for the successful aluminium operations.
Our smelters fully backed by captive power
plants located at the pitheads of the owned
coal mines make us one of the lowest cost
producers globally.
Downstream products
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We are the market driver for aluminium products
in India, being the largest downstream producer.
We leverage our strengths further when it
comes to downstream strategy. The recent acquisition
of downstream producer Novelis gives us a
well-diversified geographical market base
and enhances our stature in the area of downstream
production.
Novelis is the world leader in rolled aluminium
products; thus, this acquisition extends our
reach in the industry.
Novelis also has long-standing relationships
with leading customers, which Hindalco expects
to grow. This combination of strong integrated
and downstream production offers us multiple
advantages.
Copper
We have one of the world's largest single-location
custom smelters at our Dahej facility in Gujarat,
India along with a power plant and nearby
jetty.
In our pursuit of vertical expansion, we extended
our presence in copper production across national
borders when we acquired the Nifty and the
Mt. Gordon mines in Australia. These mines
secure partial supply of our concentrate requirement.
The efficient handling of logistics and transportation
in this business is paramount in keeping costs
low, and that is why our ownership of the
all-season jetty at Dahej is so financially
advantageous. We are also mindful of opportunities
related to the production of copper that can
benefit the business.
Gold and silver have an affinity to copper
ore. We extract them, as well as trace amounts
of platinum and palladium after copper refining.
We ensure that the dispatch of these precious
metals is conducted using special armoured
vehicles that we contract on a long-term basis
through agencies.
We use the sulphuric acid employed in copper
processing by converting it to phosphoric
acid and then using that to produce the fertilisers
diammonium phosphate and nitrogen phosphorus
potassium compound.
We also import the rock phosphate required
to produce phosphoric acid using our jetty,
which is capable of handling more than four
million tpa of cargo. The jetty is also used
to import copper concentrate, ammonia and
coal and to export copper products. One and
two million tpa of commercial cargo can additionally
be handled, depending on captive cargo requirements.
Another strong growth catalyst is research
and development.
We maintain a steady focus on research, which
has resulted in advances in the company's
operations and commercial strategy as well
as an increased focus on foreign trade.
All told, we are well positioned for greater
value creation.
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