Vedanta eyes higher aluminium output on strong LME, low alumina prices

Buoyed by resilient LME (London Metal Exchange) prices and declining cost of alumina, Vedanta aims to ramp up its aluminium output to 1.6 million tonnes (mt) this financial year. The complete ramp-up of its second aluminium smelter at Balco (Bharat Aluminium Company) and ramp-up of the balance pot lines at its 1.25-mt-per-year Jharsuguda smelter would help Vedanta achieve the higher production target.

Vedanta exited 2016-17 with a record aluminium production of 1.2 mt (excluding trial production). Last financial year, cost of production (CoP) of aluminium fell seven per cent to $1,463 per tonne helped by lower alumina cost, volume ramp-up, rupee appreciation, and cost-saving initiatives, the company said in its annual production statement.

In current financial year, Vedanta's average aluminium CoP is projected to be $1,475-1,500 per tonne. Vedanta's strategic priorities are achieving full capacity ramp-up of the Jharsuguda-II and Balco-II smelters with capacity of 2.3-mt per annum (mtpa) of aluminium, strengthening bauxite sourcing and supply chain, expanding the Lanjigarh alumina refinery capacity to 4 mtpa and pruning hot metal cost by optimising raw material sourcing and reducing costs. Abhijit Pati, chief executive of Vedanta's aluminium business, was not available for comment. According to the company's statement for 2016-17, Vedanta's Ebitda (earnings before interest, taxes, depreciation, and amortisation) from aluminium operations in FY17 was higher at $344 million compared to $107 million in 2015-16. 

Higher Ebitda was fuelled by volume ramp-up, increased LME prices, input commodity deflation, improved product mix, depreciation of rupee, and cost-saving initiatives. Average LME prices for FY17 stood at $1,688 per tonne, higher by 6.2 per cent over the previous year's $1,590 a tonne. During the last financial year, aluminium traded at a two-year high of $1,900 per tonne.

In FY17, Vedanta's alumina CoP was $282, down 10.6 per cent. “Vedanta was able to cut alumina production cost by operating both streams of its Lanjigarh refinery, lower bauxite cost driven by higher quality bauxite, operating efficiencies and rupee depreciation,” said a company source.

Vedanta's alumina ouptut in FY17 at 1.2 mt was up 24 per cent. The Lanjigarh refinery has a de-bottlenecked capacity of 1.7-2 mtpa. The refinery has permits to produce up to 4 mtpa of alumina. 

In 2017-18, Vedanta would continue its double-stream operations to support ramp-up of aluminium pots. Bauxite would be sourced from its captive mines of Balco, laterite mines, other domestic sources, and imports.

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