London-listed conglomerate Vedanta Resources with diversified interests in metals and mining, said it has commenced ramp-up of the third potline at its Jharsuguda aluminium smelter in the eastern state of Odisha.
Though Vedanta was supposed to put this potline of 0.3 million tonne per annum capacity online towards the fourth quarter, its ramp-up has been pre-poned amid resilient LME aluminium prices, said a senior executive at Vedanta Ltd. Aluminium prices on the LME for the cash buyer were ruling at $1667.50 per tonne. (as on October 6).
“This is a good time to expand capacity as LME prices look favourable to us. The third potline ramp up at Jharsuguda will help generate more cash flow and also mitigate the impact we suffered because of power outages when we went for expansion of the first two potlines’’, said the Vedanta official overseeing aluminium operations.
Vedanta operates two aluminium smelters at Jharsuguda. While one standalone smelter of 0.5 million tonne per annum (mtpa) capacity was on full steam, the other unit of 1.25 mtpa capacity within the SEZ (Special Economic Zone) was lying idle for a long time due to power unavailability.
Vedanta proceeded on its plan to put the SEZ smelter online after it got a favourable order from power regulator- Odisha Electricity Regulatory Commission (OERC) to use upto 1800 Mw power from its 2400 Mw coal-fired unit in the vicinity of its smelter complex. With this order, Vedanta is in a position to use 1800 Mw entirely for its smelter operations from April 1 this year. The remaining 600 Mw dedicated to the Odisha grid.
However, in the April-June quarter, Vedanta suffered power outages and was forced to buy power from external sources to keep its smelters running. This escalated the cost of its aluminium production to $1476 per tonne.
In its guidance for 2016-17, Vedanta has pegged its aluminium production cost to be below $1400 per tonne, down from the level of $1572 in FY16 and $1755 in FY15. The metals and mining giant is eyeing 1.5 million tonne (mt) of hot metal output this fiscal. This needs three mt of alumina. Whilst 1.5 mt alumina would be sourced from the Lanjigarh refinery, Vedanta aims to import the balance to feed its smelter complex.
Presently, Vedanta’s Lanjigarh alumina refinery at the foothills of bauxite laden Niyamgiri hill range, was running without local raw material sources. But, Vedanta expects to start laterite mining operations in this quarter (October-December) period. The Odisha government had earlier allotted three small laterite mines with some bauxite deposits to Vedanta. The government has also assured to meet 50 per cent of the refinery’s bauxite requirement from March 2017. The refinery has approvals to operate at four mtpa capacity but its current run rate was 1.5 mtpa. Vedanta is committed to take alumina production to the rated level once local bauxite sources are firmed up.
Aluminium operations helped Vedanta post EBITDA (earnings before interest, taxes, depreciation and amortisation) of $119.2 million in 2015-16 when average aluminium price on LME was $1590 a tonne. It produced 0.93 mt of aluminium last fiscal from its smelting units at Jharsuguda and Balco’s Korba facility in Chhattisgarh.
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