Wednesday, September 30, 2015

Vedanta looking to clinch domestic deals to cut alumina imports

After degrading capacity of its one million tonne alumina refinery at Lanjigarh by 35%, Vedanta is looking at options to source alumina from the domestic market to cut its dependence on high cost alumina imports.

To feed its smelting unit at Jharsuguda, Vedanta is in talks with Aditya Birla Group promoted Hindalco Industries and Anrak Aluminium ( a joint venture between Andhra Pradesh based Penna Group of Industries and Ras Al Khaimah Investment Authority of UAE) for sourcing alumina.

"We are in talks with players like Hindalco and Anrak Aluminium. Hindalco has assured us 25,000 tonne of alumina supply in the next three months. Anrak would be in a position to offer alumina after it commences bauxite mining. Vedanta is looking at all possible options to cut cost of its aluminium business", said Abhijit Pati, chief executive officer (aluminium), Vedanta Ltd.

Vedanta had cut capacity of its Lanjigarh refinery and was gearing up for shutdown on economic unviability. The refinery, sourcing its entire bauxite requirement from external sources was raking in loss of Rs three to four crore per day.

Spot prices of alumina in the global markets were hovering around $270 a tonne. Even when its Lanjigarh refinery ran at full capacity, Vedanta used to import one million tonne of alumina to cater to the requirement of its 0.5 million tonne smelter.

Meanwhile, Vedanta's bid to source alumina from public sector National Aluminium Company (Nalco) has come a cropper with the latter expressing its unwillingness to enter into such a deal. It is an irony that Nalco exports about 60% of its alumina output, while Vedanta imports the same material to feed its Jharsuguda aluminium smelter.

"It would be a win win situation for both the companies if Nalco sells a portion of its exportable alumina to Vedanta instead of shipping it outside", argues a source at Vedanta.

But Nalco management has a different view. "We cannot sell our alumina meant for export as we have international commitments. Our employees are also not comfortable with the idea. Moreover, Vedanta is a competitor", pointed out a senior Nalco official.

Even the attempts of the state government to mediate between Vedanta and Nalco to ensure bauxite supply to the former's Lanjigarh alumina refinery struggling for raw material has fallen flat with Nalco pointing out that bauxite mines held by it are for captive use and as per the present mining rules it cannot sell bauxite to any third party.

Despite shortage of alumina in the domestic market, Nalco has continued with its policy of exporting surplus alumina of over one million tonne, bolstering its bottomline. It has awarded its first two alumina annual sale tender of 300,000 tonne each during September and October this year for supply to a Geneva-based trader Vitol.

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