 "Why is Anil Agarwal despairing about aluminium investment?")
Leading metal makers such as ArcelorMittal and Vedanta will be keen on more work in India but for the dispiriting project delays, especially those pertaining to sanctions for mines. In an interview with Bloomberg TV, Vedanta Chairman Anil Agarwal regretted his $8-billion investment in the country's largest single-location aluminium complex in Odisha. Agarwal said he had the choice of either building the complex in Odisha or acquiring the US owned, Mexican copper producer Asarco.
Factors in favour of Odisha are availability of high-quality bauxite and coal to run power plants linked to the smelter. But what remains highly debilitating for the one-million-tonne (mt) alumina refinery at Lanjigarh is Vedanta's inability to procure bauxite from Odisha, after its attempts to open mines in Niyamgiri Hills ended in a fiasco. Also, it didn't see success in its attempt to buy alumina from National Aluminium Company (Nalco). Vedanta Aluminium Managing Director Sushil Roongta says, "We are ready to pay a premium over the prices at which Nalco sells alumina in the world market. Moreover, by selling alumina to us, Nalco will save on logistical and transportation costs." This has, however, not cut ice with Nalco.
Starved of bauxite, the Vedanta refinery remained shut for about seven months earlier this year. Responding to the pleas of the Lanjigarh community, whose livelihoods are linked to the refinery, and to make sense of the investment, operations were resumed on July 11, using bauxite hauled from Gujarat, Chhattisgarh and Jharkhand. Roongta has said Vedanta imported bauxite from Indonesia, and this cost the company about five times the price supplies from Odisha would entail. India importing bauxite is indefensible, as the country has the world's fifth-largest bauxite deposits of about three billion tonnes. Bauxite procured from multiple sources is, at no point, adequate to run the Lanjigarh refinery at full capacity. As a result, alumina-production costs have soared.
Agarwal's frustration is understandable, as under the normal circumstances of bauxite coming from Odisha mines, the Vedanta refinery will figure among the lowest-cost quartile plants globally. In any case, Agarwal has bitten the bullet and it is now for Roongta to make the best of it. Supplies from Nalco are ruled out, as its chairman Ansuman Das is committed to using alumina for its own use and, subsequently, exporting the surplus. But the Odisha government, which encouraged Vedanta to invest Rs 50,000 crore in the state, cannot disown its responsibility to give the company access to bauxite deposits other than those in Niyamgiri. Till new captive mines are opened, state agencies are obliged to meet the requirements of the Vedanta refinery.
It should not be lost on the government that what Vedanta has done so far is only part of its plan for refinery and smelter capacity-building in Odisha. Given an uninterrupted supply of bauxite from within the state, preferably from captive mines, Vedanta will see its refinery capacity rise to five mt and the smelter capacity at Jharsuguda from 500,000 tonnes to 1.6 mt. The bauxite supply problem apart, aluminium prices on London Metal Exchange (LME) staying stubbornly low, leaving as much a third of the world aluminium industry in the red, might be leading Agarwal to think instead of aluminium, he should have furthered Vedanta's cause in the copper space. The group owns a 400,000-tonne copper smelter in Tuticorin, and the capacity is to be doubled in the next two years. Acquisition of Asarco would have made Vedanta a world leader in copper.
Aluminium producers in the US and Europe, Rusal of Russia (the world's largest), have cut production in their attempts to restore the demand-supply balance. But their efforts are negated by increases in production in China and Gulf Cooperation Council member countries. Should India be creating new aluminium smelting capacity when the world is struggling to cope with the surplus? "Domestic aluminium makers are experiencing difficulties because of low prices and slow economic growth. But I believe aluminium has a good future in our country in a 10-year horizon, and beyond. Besides the electrical segment, the metal will find increasing application in automobiles, construction and packaging spaces. Therefore, we will need more and more smelter capacity as we go forward. Our per capita aluminium use has to significantly rise from the low of 1.2 kg," says Roongta.
Factors in favour of Odisha are availability of high-quality bauxite and coal to run power plants linked to the smelter. But what remains highly debilitating for the one-million-tonne (mt) alumina refinery at Lanjigarh is Vedanta's inability to procure bauxite from Odisha, after its attempts to open mines in Niyamgiri Hills ended in a fiasco. Also, it didn't see success in its attempt to buy alumina from National Aluminium Company (Nalco). Vedanta Aluminium Managing Director Sushil Roongta says, "We are ready to pay a premium over the prices at which Nalco sells alumina in the world market. Moreover, by selling alumina to us, Nalco will save on logistical and transportation costs." This has, however, not cut ice with Nalco.
Starved of bauxite, the Vedanta refinery remained shut for about seven months earlier this year. Responding to the pleas of the Lanjigarh community, whose livelihoods are linked to the refinery, and to make sense of the investment, operations were resumed on July 11, using bauxite hauled from Gujarat, Chhattisgarh and Jharkhand. Roongta has said Vedanta imported bauxite from Indonesia, and this cost the company about five times the price supplies from Odisha would entail. India importing bauxite is indefensible, as the country has the world's fifth-largest bauxite deposits of about three billion tonnes. Bauxite procured from multiple sources is, at no point, adequate to run the Lanjigarh refinery at full capacity. As a result, alumina-production costs have soared.
Agarwal's frustration is understandable, as under the normal circumstances of bauxite coming from Odisha mines, the Vedanta refinery will figure among the lowest-cost quartile plants globally. In any case, Agarwal has bitten the bullet and it is now for Roongta to make the best of it. Supplies from Nalco are ruled out, as its chairman Ansuman Das is committed to using alumina for its own use and, subsequently, exporting the surplus. But the Odisha government, which encouraged Vedanta to invest Rs 50,000 crore in the state, cannot disown its responsibility to give the company access to bauxite deposits other than those in Niyamgiri. Till new captive mines are opened, state agencies are obliged to meet the requirements of the Vedanta refinery.
Aluminium producers in the US and Europe, Rusal of Russia (the world's largest), have cut production in their attempts to restore the demand-supply balance. But their efforts are negated by increases in production in China and Gulf Cooperation Council member countries. Should India be creating new aluminium smelting capacity when the world is struggling to cope with the surplus? "Domestic aluminium makers are experiencing difficulties because of low prices and slow economic growth. But I believe aluminium has a good future in our country in a 10-year horizon, and beyond. Besides the electrical segment, the metal will find increasing application in automobiles, construction and packaging spaces. Therefore, we will need more and more smelter capacity as we go forward. Our per capita aluminium use has to significantly rise from the low of 1.2 kg," says Roongta.