Vedanta to raise downstream product output by 25% in H2

Metals and mining conglomerate Vedanta has aimed at a 25 per cent jump in output of downstream products in the October-March period, to counter the surge in imports.

As a result of the simmering trade conflict between the US and China, India has witnessed a swarm of imports of various aluminium products. While scrap imports from the US have zoomed 144 per cent, overall imports have risen 32 per cent in the July-September period, unnerving domestic aluminium producers.

In addition to scrap, imports of fake semis from China and wire rods from South-East Asia have compounded the woes of domestic makers. Imports are eating into the market share of the three primary producers — Vedanta, Hindalco Industries and state-controlled National Aluminium Company (Nalco).

The share of imports in the total domestic aluminium consumption in the country has reached a staggering 60 per cent, forcing domestic manufacturers to either widen their export market or expand production of downstream products, especially those that can act as import substitutes.

Apart from combating imports, Vedanta’s proposal to expand the downstream, value-added portfolio is expected to boost realisations.

“On the marketing side, we continue to focus on improving net premiums by progressively increasing value-added production. The value-added production is expected to grow 25 per cent in the second half from 432,000 tonnes, which we saw in the first half, driven by improved sale of wire rods in the domestic market, as well as higher billet sales internationally,” Srinivasan Venkatakrishnan, chief executive officer of Vedanta Resources, said at the results conference call.

Flagging concerns on imports, he said: “Specifically, scrap imports from the US significantly increased by an astonishing 128 per cent in the first quarter of this year, and a further 144 per cent in the second quarter, over the same period last year. This is one of the areas in which we are taking policy intervention and support from the government. We are certainly committed on improving the overall profitability in the aluminum business and unlocking its true potential.”

Like other primary producers, Vedanta is struggling to contain its aluminium smelting cost due to input commodity inflation. Despite Vedanta's focus on structural cost reduction, the cost of production (CoP) for aluminium was on the higher side at $2,000 per tonne because of market forces driven by higher coal costs.

Vedanta eventually looks to prune its aluminium CoP to $1,500 per tonne. To achieve competitive costs in aluminium CoP, Vedanta has secured 3.2 million tonnes of additional linkages from Tranche IV of the coal auctions. Mining has also commenced at the captive Chotia mine, which feeds the group-owned BALCO smelter at Korba. To optimise its alumina making costs, Vedanta has inked a long-term linkage agreement with Odisha Mining Corporation.

Under the arrangement, 70 per cent of bauxite mined by OMC from its Kodingamali mine will be fed to Vedanta's Lanjigarh alumina refinery installed at the foothills of the bauxite-laden Niyamgiri hills.

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