Vedanta to halve output at alumina refinery, cut jobs

By Krishna N. Das

NEW DELHI (Reuters) - Vedanta Ltd will halve output at its 1 million tonne-a-year alumina refinery in Odisha state in about two months and cut jobs, a senior executive said, due mainly to a shortage of raw material bauxite and weak world prices.

Aluminium prices are stuck at near six-year lows due to a glut in China and capacity addition in the Middle East and India. Russia's Rusal, the world's biggest producer, said on Thursday it expected the metal to remain under pressure for the rest of the year.

This has made business particularly difficult for Vedanta, controlled by scrap dealer turned billionaire Anil Agarwal, as the company does not own bauxite mines unlike local rivals Hindalco and National Aluminium Co Ltd .

"The way aluminium prices are now, you can only operate if you have your own bauxite," Abhijit Pati, chief executive of Vedanta's aluminium business, told Reuters on Thursday. "(But) there is no visibility on bauxite."

The refinery in Odisha's Lanjigarah annually needs about 3.5 million tonnes of bauxite, which the company buys from far-off states like Gujarat and Maharashtra. The government last year rejected Vedanta's request to mine bauxite in the Niyamgiri hills of Odisha considered sacred by local tribal people.

Cost of transporting bauxite at a time when aluminium prices have tanked has made the refinery unviable, Pati said. Job cuts at the plant that employs about 2,000 people are likely to be proportional to output reduction, he said.

Indian aluminium companies have also urged the government to raise import duties on both primary aluminium and scrap after shipments rose in the April-June quarter. About 1.5 million of India's annual demand of 3.5 million tonnes is met through imports from China and the Middle East.

Federal mines secretary Balvinder Kumar said some secondary aluminium companies that depend on aluminium scrap imports do not want the duties to be raised, tying the government's hands.

India, whose aluminium consumption is rising at above 10 percent per year, imports about 850,000 tonnes of scrap a year.

"There are conflicting interests," Kumar told Reuters on Monday. "We have not made up our mind so far".

(Reorting by Krishna N. Das in New Delhi; Editing by Anand Basu)