India's aluminium makers face 'precarious situation' on coal crunch

An acute coal crunch in India has created a “precarious situation” for aluminium producers as stockpiles of the fuel plummet to critical levels, according to the country’s top industry group.

Most aluminium factories, which have their own power generation plants, have stockpiles for only one to two days, B.K. Bhatia, additional secretary general at the Federation of Indian Mineral Industries said by phone. While aluminium output hasn’t been affected so far, there may be production cuts by the end of the month if coal supplies don’t recover, he said.

Tightening supplies of coal have triggered a power crisis in India as about 70% of the nation’s electricity is fired by the fuel. A power cut of more than two hours at aluminium plants can cause the molten metal in the potline to become solid, forcing the smelting unit to shut down for at least six months, according to the Aluminium Association of India.

FIMI has written to India’s coal ministry seeking restoration of coal supplies as soon as possible as aluminium and steel plants have “abysmally low critical coal stocks.” The power plants are being forced to reduce generation and face a “huge risk” of shutdowns, it said. 

The low supplies have “brought down the industry to almost standstill and left with no time to devise any mitigation plan to continue sustainable operations,” it said in the letter.

India’s aluminium companies, including Vedanta Ltd., Hindalco Industries Ltd. and state-run National Aluminium Co., have a combined annual capacity of about 4 million tons of the base metal. 

Imports of coal, which makes for about 35% of the cost of producing the metal, are not a viable option to meet the shortfall as international prices have gone up exponentially and ocean freight is also at an all-time high, it said.