Vedanta wants Nalco to help it with alumina

After losing out on mining the Niyamgiri hills of Orissa, Vedanta Aluminium has approached state-owned National Aluminium Company, or Nalco.

“Vedanta Aluminium wants to buy alumina from us,” B L Bagra, director (finance), Nalco, told Business Standard.

A spokesperson at Vedanta confirmed the move. “Nalco has excess alumina capacity and is actively exporting it. Since we are in short supply of bauxite, we are keen on buying for our aluminium smelter,” he said.

Three tonnes of bauxite are required to produce one tonne of alumina and two tonnes of alumina are required to produce one tonne of aluminium. So, Vedanta Aluminium needs 3 million tonnes of bauxite to run its 1-million tonne alumina refinery. Or, to produce at its full capacity of 250,000 tonnes of aluminium per annum, the company needs 500,000 tonnes of alumina.

Since Nalco has a 460,000-tonne aluminium smelter and a 1.57-million tonne alumina refinery, the company is left with around 70,000 tonnes of alumina.

The spokesperson at Vedanta Aluminium said, “We have tied up with GMDC (Gujarat Mineral Development Corporation) for 500,000 tonne bauxite supply, which they will do over nine months time, with a minimum 50,000 tonnes per month. Apart from that, we are sourcing some bauxite from our mines at Bharat Aluminium Company in Chhattisgarh.”

“Since this bauxite arrangement is definitely not enough, we have no other alternative but to buy alumina and continue running our aluminium smelter.”

An analyst with a domestic brokerage said, “Refining one tonne of bauxite into alumina costs $250 and buying alumina from Nalco will cost at least $350 per tonne. Therefore, buying alumina from Nalco will significantly push up Vedanta’s cost of production of aluminium.”