Indian aluminium producers on a capacity expansion spree

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All three domestic aluminium producers of the country – Hindalco, Balco and Nalco –have decided to undertake major capacity expansion programmes in primary metal and Value Added Products (VAPs).

Anil Agarwal-owned Vedanta has said it will make BALCO a nearly 1 million tonnes per annum smelter by building new capacity of 414,000 tonnes over the next 18 to 24 months. Post this expansion Vedanta, including its facility at Jharsuguda, will become a 2.8 million tonnes per annum aluminium group. At the same time, Vedanta is expanding the capacity of Lanjigarh alumina refinery from 2 to 5 million tonnes per annum to meet incremental requirements of feedstock for its two smelters.

Aditya-Birla group company, Hindalco is focused on expanding its VAPs portfolio to protect itself from fluctuations in LME metal prices. Over the next few years, it aims to enhance its VAPs capacity from over 300,000 tonnes to over 600,000 tonnes as part of downstream strategy.

Public sector Nalco is building a greenfield 600,000 tonnes per annum smelter and expansion of alumina refinery capacity by 1 million tonnes per annum..

The two aluminium makers in the private sector and the one owned by the central government, have all done exceedingly well in the first quarter of 2021-22. Not only have they earned record EBITDA, but the three groups also made more aluminium in the quarter year-on-year as they further brought down production cost, principally by reducing energy consumption.

Aluminium production is highly energy intensive. In India, coal-fired electricity constitute between 45% and 50% of aluminium production cost in India, followed by smelter feedstock alumina at 31%. Smelters in Europe and Canada using hydropower and those in West Asia running on electricity by burning natural gas have a cost advantage over the Indian industry. 

High LME aluminium prices, efficiency improvement and greater rates of conversion of primary aluminium to value added products (VAPs) have helped Hindalco and Vedanta to enhance their EBITDA to an all-time high. For NALCO, export of intermediate product alumina has contributed significantly to bigger first quarter turnover and profits

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