Metals & mining conglomerate Vedanta Ltd is planning to ramp up its Lanjigarh alumina refinery capacity to six million tonnes per annum (mtpa), up from one mtpa now. Vedanta’s proposal for expansion was recently cleared by the High-Level Clearance Authority (HLCA), the apex body to approve investments in Odisha.
“Our Lanjigarh refinery expansion will happen in a staggered manner. In Phase-I, we will scale up capacity to four mtpa and we hope to achieve this by March 2020. At full ramp-up, our dependence on imported alumina will trickle to nil”, said a senior Vedanta Ltd executive.
Presently, Vedanta is importing alumina in upwards of one million tonne each year. The huge dependence on alumina imports is exerting pressure on its aluminium production cost. Vedanta’s aluminium making cost stood at $2018 per tonne in Q2 of this financial year. Metal production costs were impacted by volatility in imported alumina prices and coal availability issues. Vedanta has offered guidance on its average aluminium production cost to be in the range of $1950-2000 per tonne during FY19.
To ward off from the vagaries of fluctuating input costs, Vedanta is aiming at upstream integration. It has proposed to install a caustic soda production unit at Dhamra with an estimated investment of Rs 65 billion. This proposal, too, has got the seal of approval from the Odisha government.
Though upstream integration, Vedanta plans to contain its alumina production cost which escalated to $358 per tonne in Q2 led by a cost-push factor of ingredients like coal and caustic soda. While caustic soda prices are ruling firm, coal prices have shot up during April-October for non-regulated sectors, chiefly, aluminium and cement. Erratic and deficient coal supplies were also hurting the non-regulated players as coal supplies were prioritised for the power sector.
Vedanta lacks captive bauxite resources, unlike its peers National Alumina Company Ltd (Nalco) and Aditya Birla Group-owned Hindalco Industries. Vedanta’s Lanjigarh refinery in southern Odisha is fed by bauxite sourced from other states and countries like New Guinea and Australia. Of late, Vedanta has sealed a long-term bauxite sourcing arrangement from the state-controlled Odisha Mining Corporation (OMC). As per the pact, 70 per cent of the bauxite mined by OMC at its captive Kodingamali mines will be supplied to Vedanta. During Q3 of this financial year, Vedanta expects to source 250,000 tonnes of bauxite per month from the OMC mine.