Some of the key characteristics of aluminium production technology are
- Economies of scale: Alumina refining and aluminium smelting operations are influenced by economies of scale. The minimum economic size of an alumina refinery is around 1 mtp a, and that of a smelter unit is 250, 000 tpa. Refining operations are influenced more by economies of scale, as refining is a continuous process.
- High capital intensity: Alumina refining and aluminium smelting are highly capital intensive. A new refinery and smelter, minimum economic size would require an investment of over $ 1 billion each.
- High power intensity: Aluminium smelting is highly energy intensive and requires uninterrupted power supply.
Interruptions in power supply could have a significant impact on the cost of production. In India, most producers have set up captive power plants, due to the unreliable and high cost power from the grid. The need for setting up captive power plants with new smelters and expansion projects has also led to higher investment requirements. - Proximity to mines: Alumina refineries are located close to bauxite mines, as the cost incurred in the transportation of alumina is lower. (One tonne of primary aluminium requires around 5 tonnes of bauxite, or 2 tonnes of alumina.
) In addition, given that alumina refineries are designed for specific bauxite varieties, the refineries need to have long-term contracts with specific bauxite mines, in order to ensure uninterrupted supply of the required variety of bauxite. - Continuous supply of low cost electric power: Smelters must be located close to a continuous supply of low cost electric power. - Mining and refining, and smelting operations in separate locations: In the aluminium industry, mining and refining, and smelting operations are increasingly being located at different places and managed by different entities, due to the technological differences in the various stages of aluminium production.