Yesterday I briefly touched on India’s coal shortage.
And today, I feel compelled to say that it looks like their coal crisis is going to set the foundation for a whole new wave of investment in an unexpected market.
According to India’s very own National Aluminum Company (BSE: NALCO.BO), the domestic coal shortage is forcing them to open a new smelting plant abroad where natural gas and coal are cheaper.
Some of the proposed locations for the plant include Oman, Vietnam, Indonesia, Malaysia, and the United Arab Emirates.
But another likely contender – if the timing works out – could be Iran.
“We are facing a massive energy challenge in India,” Charmain of the National Aluminum Company, Ansuman Das said.
Because of the 23% shortfall in coal supplies versus demand, the company wants to find a more secure source of cheap energy for its new $3 billion smelting facility.
And Iran makes perfect sense as a potential location.
If sanctions against Iran – which were extended last month – end this coming November, it could be the ideal location for the aluminum plant.
Energy costs are 40% of the expenses for Aluminum manufacturers, so as expensive imported coal to India becomes less attractive, NALCO will look for less prohibitive costs in places with an abundance of natural gas or coal.
And Iran holds 17% of the worlds proven reserves of natural gas, placing them right behind Russia as the world’s biggest reserve holder.
With 1,193 trillion cubic feet of natural gas, Iran could eventually be an even cheaper hub for the commodity than the U.S.
And although for many years Iran struggled to develop those resources, they have made some progress recently despite international sanctions.
As their production edges ever closer to 7 trillion cubic feet, Iran can market itself as a mass producer of oil and gas.
This comes with two huge ifs, of course.
The first would be that Iran has yet to move at full speed on their production of gas because they are focused on oil which sells at a higher price tag.
But with companies beginning to look at Iran as a possible investment, it’s only a matter of time before gas production hits full steam.
And another huge if is that these investments can only happen if Iran and the U.S., Germany, Russia, the U.K., China, and France reach a deal in November or anytime in the near future.
But if they do, the new investment eclipses more than energy and Iran’s behemoth South Pars gas field…
Bloomberg reports that there are a bevy of multinational corporations in various industries clamoring for a first crack at investing in Iran once the sanctions against them are lifted.
These companies range from Eni SpA in Italy, Altsom SA, Orange SA, French car-maker Renault SA, and ArcelorMittal among several other conglomerates desperately looking for a foothold in a large Iranian market long deprived of foreign investment.
So if the two sides reach a deal as early as this fall expect the Iranian market to be a boon for the global economy as there would be more natural resources, more exports and imports, and more economic activity all without the fear of nuclear proliferation.