Aluminum makers in India desperate for coal as power supply gets erratic

India’s aluminum makers are calling on state-run Coal India Ltd. to restore supplies of the fuel, after the producer cut back shipments to prioritize deliveries to power plants amid surging electricity demand.

The producers, typically among the largest industrial electricity consumers, face severe disruption if smelters experience outages and have few alternatives to domestic coal, according to the Aluminium Association of India. 

“Resorting to imports at such a short notice is not feasible,” said the group, which includes Hindalco Industries Ltd. and state-run National Aluminium Co. Ltd. Global seaborne coal prices are surging, with physical coal cargoes in Australia’s Newcastle port close to a record high. 

A crunch on coal supply highlights the commodity’s importance in India, which burns the fuel for about 70% of its power needs. The nation is forecast to increase consumption in the next few years, even as Prime Minister Narendra Modi’s targets a vast increase in renewables.

Coal inventories at Indian power plants fell to almost 13 million tonnes, about 66% lower than a year ago as electricity consumption rebounded on the revival of the nation’s economy. Average spot power prices at the Indian Energy Exchange Ltd. more than doubled from the start of the year to the final week of August, data show.

About 83% of Coal India’s daily shipments are currently being sent to power plants, compared with about 75% usually, to help replenish their depleting inventories, according to India’s coal ministry.

India’s aluminum companies, which have built a combined 9 gigawatts of power generation capacity to ensure uninterrupted supplies to smelters and refineries, have sent a letter to Coal India Chairman Pramod Agrawal to highlight risks of inadequate fuel supply. An outage of more than 2 hours can result in the freezing of molten metal in potlines in which aluminum is made, according to the group. That can require a smelter to shut down completely for at least 6 months, the letter said.

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