Vedanta Aluminium aims to triple capacity

Reuters
Workers walk in front of the Vedanta Aluminium factory in Lanjigarh
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Workers walk in front of the Vedanta Aluminium factory in Lanjigarh in Orissa state February 22, 2010. REUTERS/Reinhard Krause/Files

By Krishna N Das and Jatindra Dash

NEW DELHI/BHUBANESWAR (Reuters) - Vedanta Aluminium will triple its capacity by 2015 to 2.3 million tonnes to cater for an expected surge in demand in India, its managing director said, even though its inability to source enough alumina at home has forced it to import the raw material.

The company, a unit of London-listed Vedanta Resources Plc (LSE:VED.L - News), has been importing more than 1 million tonnes of alumina per year because plans to mine bauxite to feed its alumina refinery are on hold while the authorities look at opposition from people in Odisha.

Vedanta Aluminium's need for alumina, produced by refining bauxite, would nearly triple to 4.5 million tonnes in three years as it adds smelting capacity, Managing Director Sushil Kumar Roongta told Reuters.

"We'll have to continue importing alumina till my refinery starts operating at full capacity," said Roongta, referring to the 1-million-tonne-a-year alumina refinery that has been shut several times due to unavailability of bauxite.

"Vedanta's overall alumina demand is growing and is going to grow," he said in an interview in his Delhi office.

The company is also seeking to buy alumina from state-owned National Aluminium Co Ltd (Nalco) (NSI:NATIONALUM), India's largest alumina exporter, which ships out nearly the same amount as Vedanta Aluminium imports.

Nalco has so far refused to sell alumina at home, saying it was against company policy. Indeed, it was looking to raise alumina exports by 40 percent to 1.4 million tonnes this fiscal year, its production chief said in August.

Vedanta Aluminium officials say Nalco could effectively earn $40-$50 more per tonne of alumina by supplying to Vedanta instead of exporting, mainly on account of lower charges for logistics and port handling.

Nalco sold 30,000 tonnes of alumina at about $335 per tonne on a free-on-board basis to a Dubai-based buyer in June. The company awarded a tender to the Iran Aluminium Co in August to sell 30,000 tonnes of alumina, sources have said.

"While the country experiences an alumina deficit, the Middle Eastern smelters are benefiting from (Nalco's exports)," Barclays analysts wrote in a recent note.

"Nalco as an independent company should be free to decide its marketing strategy, but it adds another item to the list of contradictions of the Indian metals and mining universe," the analysts wrote.

Despite raw material shortages, Vedanta Aluminium is keen to add capacity based on expected aluminium demand in India.

The country's aluminium consumption is likely to rise to 5 million tonnes per year by 2015 from 1.6 million tonnes now, according to the mines ministry. India's per capita consumption of aluminium is 1.2 kg against the world average of 7-8 kg.

"Our expansion is not contingent upon what Nalco does," Roongta said.

(Editing by Alan Raybould)

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