NBC/ED (MKTG)/ Date: 07.04.

2011

Dear
The highlights of Marketing Department for the month of March 2011 are placed for your kind information: 1. MARKET TRENDS ALUMINIUM: The 3-month LME aluminium prices traded in the range of $.......0/t - $........0/t. Aluminium put in a more solid performance, climbing to a 30-month high during the course of the month, with fundamental stimulus stemming from the MENA unrest that accounts for approximately 10 percent of global smelting capacity. The aluminium price outperformed those of the other base metals compared with 6%-8% falls in copper through to tin the reason being that aluminium price had previously lagged those of the other base metals, and therefore had less to lose. More importantly, aluminium remains the only base metal with appreciable levels of production capacity in the MENA region, which has been beset by civil unrest since December. Analysts view under the current situation was that, as the political risk in the region increases this could deter further investment in projects and any disruption to output or delays in new projects would impact available supply in the world and significantly tighten the market. Aluminium production being energy intensive, higher oil prices were supportive due to prospect of higher electricity cost inputs which would push up smelter Business Costs and raise the marginal support level for aluminium and thus provide a higher level of support for the price. A weaker US dollar, increased investor inflows on account of strong economic data from the USA and Germany and CTA momentum based funds led to new longs buying from new shorts and signalled market bullishness. Analysts however comment that persistent debt issues in Portugal and Greece could derail confidence in Europe and pull aluminium prices lower. Demand in China faltered during the month as interest rates impacted the ability to obtain credit and lull during the holiday periods. Demand rebounded in the USA in transportation led by strong automotive, truck and trailer sectors. In Europe, upwards momentum continued for rolled products and foil demand but extrusions demand in the construction sector remained lackluster. German automotive exports remained strong buoyed by demand from South East Asia. Apprehension however lingered over high levels of sovereign debt in Southern Europe and inflation concerns in China and India which analysts presume, could damage investor sentiment thereby driving the price lower from the highs set during March. Analysts also believe that high copper prices would also lend support to aluminium which is considered as a natural hedge for copper. The LME Stocks stood at million tonnes end Mar11 which is slightly lower than the Feb11 level of 4.611million by 0.09 million tonnes which analysts coin as flirting with Danger with 4.64 million tonnes record stocks during the period of recession. Analysta also comment that the incessant widening of the Cash-3M contango structure would also

be supportive for the warehousing deals even in case of concurrent hike in interest rates by the Fed. Average LME monthly Cash settlement and three-month sellers prices from January11 to March11 are indicated below: Month Jan11 Max Avg Min Max Avg Min Max Avg Min Cash Settlement Price (in USD) 2489.00 2439.53 2360.00 2539.50 2508.18 2474.00 3Month Price (in USD) 2502.50 2455.43 2382.00 2567.00 2531.80 2501.00

Feb11

Mar11

ALUMINA : Spot prices firmed during the month to trade in the $395 - 405/t fob Australia range. The market was supported by a lack of near term availability and stronger aluminium prices. In China, prices gradually strengthen to trade in the US$427-434/t range on account of increase in volume traded since the end of the Chinese New Year and increasing demand from smelters restarts as power constraints eased resulting in refinery stocks decline. Analysts estimate that global alumina production would decrease with China accounting for a major chunk of this decline due to high caustic soda prices. However, alumina production in South America maintained its upward trend on the back of ramp-up at the Alumar refinery in Brazil and the restart at the Ewarton refinery. Going into the second quarter, analysts opine smelter grade alumina demand to remain strong and expect production to match this growth in demand thereby supporting prices in near term. ROLLED PRODUCTS: Rising consumer confidence in North America spurred on by the extension of the Bush tax cut program and by the reduction in wage taxes helped momentum in economic recovery. Demand rebounded in the USA in transportation led by strong automotive, truck and trailer sectors. US FRP demand kept up some of the momentum from 2010 during the first Quarter of 2011. There has been strong demand from the transport sector in particular, but due to the continued weakness in the residential housing market, off-take from the construction sector remains sluggish. Can stock shipments remained steady as common ally margins held strong. Billets demand continued to elevate premiums as extruders expanded purchases of billet from the Middle East and Russia. Analysts expect y-o-y growth to ease back in Q2 2011 but underlying volumes should remain firm. The Western European flat rolled products market maintained its momentum, especially within Germany. Off-take from the automotive and engineering sectors remained solid and activity has begun to improve in the aerospace sector. Firm demand for products such as can stock, brazing sheet and auto body sheet continued to pressurize the standards market causing rise in conversion margins as mills focussed on higher value products. Can stock consumption remained healthy on the back of strong demand for canned drinks. Foil demand in Western Europe remained healthy on the back of firm underlying demand. However, seasonal effects and a harsh winter subdued the

construction sector thereby affecting extrusion demand. Extrusions consumption in the solar sector also suffered from harsh winter conditions. Analysts expect demand to remain firm in Q2 2011. Chinese aluminium semis market remained muted as the lull during the Spring Festival, labor shortage and additional monetary tightening stifled demand further. With the unravelling of the fraudulent activities in the Chinese Railways the growth in rail infrastructure slackened. 2. EXPORTS i) ALUMINIUM During the month of Mar11, 9,888MT of metal was exported against an internal target of 8,000MT. There was no Rolled Products exported this month. The cumulative Exports for FY 2010-11 was 98,200MT including 104MT of Rolled Products. Further we have ..........MT of export orders for Metal in hand to be executed in FY 2011-12. ii) ALUMINA During Mar11, 91,722MT of alumina was exported exceeding the internal target of 120,000MT. The cumulative export of Alumina for the FY 2010-11 was 639,855MT. Further, we have MT of export orders in hand for shipment during FY 2011-12. 3. DOMESTIC SALES i) ALUMINIUM Total sale of 36,235MT was achieved during the month exceeding the internal target of 28,150MT by 8,085MT. This includes .........MT sold from stockyards. Pending DIs with Smelter Plant for despatches to parties was .........MT at the end of the month. The cumulative domestic metal sale for the FY 2010-11 is 340,752MT exceeding the cumulative internal target of 322,650MT by 18,102MT. The cumulative domestic sale is the highest ever domestic sale achieved during a year surpassing previous best of 289,032 achieved during FY 2009-10. 1,972MT of billets was sold in Mar11 against the internal target of 2,000MT. The cumulative billet sale for FY 2010-11 is 22,256MT against the internal target of 22,850MT. The wire rod sales during Mar11 have been 8,776MT exceeding the internal target of 7,200MT. The cumulative sale of wire rod for FY 2010-11 is 75,106MT against an internal target of 77,000MT. The cumulative metal sale (including exports) for the FY 2010-11 is 438,952MT against the internal target of 434,650MT and is 2,973MT more than total sale for the same period last year which was 435,979MT. ii) ALUMINA & HYDRATE: Total quantity of Calcined Alumina sold in the domestic market = .........MT.

a) b) c)

Total quantity of Alumina Hydrate sold in the domestic market = .......MT (as Hydrate). Total quantity of Alumina Hydrate sold in the domestic market = ........MT (as Alumina).

4. PERFORMANCE AT A GLANCE (Figures in MT) MARCH11 SALES in MT METAL(DOM) METAL(EXPORT)** TOTAL METAL ALUMINA/HYDRATE (EXPORT) HYD&ALUMINA (DOM)* Total Alumina & Hydrate ZEOLITE-A (DOM) Target 28,150 8,000 36,150 120,000 2,500 122,500 Actual 36,235 9,888 46,123 91,722 4,116 95,838 EX.(+)/S.F(-) (+) 8,085 (+) 1,888 (+) 9,973 (-) 28,278 (+) 1,616 (-) 26,662 CUMULATIVE (2010-11) Target 322,650 112,000 434,650 690,000 30,000 720,000 Actual 340,752 98,200 @ 438,952 639,855 42,064 681,919 3,854 EX.(+)/S.F(-) (+) 18,102 (-) 13,800 (+) 4,302 (-) 50,145 (+) 12,064 (-) 38,081 -

Note: * including Spl. Hydrate and Spl. Alumina . ** includes export of Rolled Products. @ - Considering the domestic MOU booking, the annual metal export target has been scaled down to about 92,000MT keeping the total metal sales target intact at 435,000MT equivalent to the production target.

5. INVENTORY OF FINISHED GOODS (SALEABLE): i) ALUMINIUM ( all figures in MT) Stock as on 31.03.2011 PRODUCT As on 31.01.11 As on 28.02.11 At Plant At Ports At S/Ys Total Total DI Pending as on 31.03.11 At Plant

Ingot/ T - Ingots Sow Billet Wire rod

8268 1735 2505 5141

6955 931 2912 3958

Strips Rolled Total

0 1705 19353

0 2028 16784

ii)

ALUMINA Stock as on 31.01.11 (IN MT) 35228 31562 10482 77272 16189 5200 21389 98661 Stock as on 28.02.11 (IN MT) 23367 30812 5200 59379 20850 10400 31250 90629 Stock as on 31.03.11 (IN MT)

LOCATION At Damanjodi At Vizag Transit to Vizag Total At Angul Transit to Angul Total Grand Total 6. TRAFFIC

The performance highlights of traffic department for the month are given below: 1 2 3 4 5 6 7 Movement of Alumina to Angul Alumina to Vizag Metal to Ports * Coal to Damanjodi CP Coke to Smelter Fuel Oil (Smelter & Damanjodi) Caustic soda to Damanjodi** UNIT MT MT MT MT MT KL DMT Target Actual

*Includes stockyard movement also. ** By Rail only.

7.

SPECIAL PRODUCTS

i) Zeolite-A: During the month 1MT of Zeolite-A has been sold. There has been no production of Zeolite-A since Jan11 for non-availability of raw material Sodium Silicate. Though there has been repeated request from marketing to procure Sodium Silicate and produce Zeolite-A, the same has not yet been procured resulting in production halt. ii) Spl Hydrate & Spl Alumina During the month ........MT of special alumina and ........MT of special Hydrate (as Alumina) was sold in the Domestic market. Plant has been asked to improve production of Special products and expand the product-mix to meet demand for these products. Marketing has time and again requested for advance procurement of saggers so that production of Special alumina could be enhanced. However there has been delay in

procurement of saggers for FY 11-12 resulting in drop in production. iii) Flat Rolled Products : 2,469MT of Rolled Products was sold in the domestic market this month. Rolling Plant has indicated that it would improve production rate of Rolled products with assistance from the Strip casting plant. Plant has been instructed to manufacture strictly as per agreed product-mix only. 8. CUSTOMER COMPLAINTS A summary of pending complaints is placed at Annexure-I for perusal. However, priority is being given to resolution of customer complaints and continuous proactive efforts are being taken for reduction of complaints. Smelter Plant is being continuously advised to take preventive steps so that complaints of repetitive nature are avoided. 9. ASSISTANCE REQUIRED 1. Production of saleable metal & refinery products of required quantity/quality as per the Production-Marketing Meeting held with smelter & refinery should be made available both for rake & plant despatches. Production of Rolled Products as per market requirements for MOU customers, PSUs, RTCs needs special attention and support. 2. More support from Production, Despatch and ERP team is required to streamline S&D module activities post - go live. Further support from M/s Wipro consultants is required for further development and stabilization of operations/process in SD module. This would ensure customer satisfaction.

(P.K. Parida)

Shri Ansuman Das Director(Commercial) NALCO,Bhubaneswar.

Dated: 07.04.2011 DRAFT D.O. LETTER

The draft D.O.letter for March, 2011 is enclosed for kind perusal. The relevant portions may kindly be updated please. Submitted please.

(G.H. Mohapatra) Sr. Manager (MKTG)

CMM (Domestic-Mktg.) EC

CMM (Domestic Mktg.) - CG

DGM (EXP, CHEM & ROLLED PRODUCTS)

ED (MKTG)