Hindalco Industries flagged coal supply constraints at its northern India smelters, pushing aluminium production costs up. Managing director Satish Pai said on Friday that costs will rise 5 per cent in the December quarter. "As a result, we had to buy a lot of spot auctions where the prices were very high."
Hindalco Industries, part of the Aditya Birla Group, has flagged coal supply constraints at its aluminium smelters in northern India, with inventories at two facilities falling to nearly half their normal levels, highlighting the impact of tight coal availability on industrial consumers.
The metals company expects aluminium production costs to rise another 5 per cent sequentially in the December quarter, after a similar increase in the September quarter, managing director Satish Pai said on Friday during a media interaction post the company's Q2 results for FY27. He said the company is still seeing tight coal availability in the northern region during October and November with easing expected in the fourth quarter.
The company's aluminium production costs in the September quarter were 5 per cent higher than in the June quarter, largely due to coal and calcined petroleum coke (CP Coke), Pai said. Coal accounted for 50-60 per cent of the increase, while CP Coke made up the remainder, he added. Pai said costs should begin to ease in the March quarter as the coal situation settles and power demand in northern areas declines during winter.
Hindalco is the world's largest aluminium company by revenue and India's largest copper producer. The company also operates its US-based subsidiary Novelis, world's largest recycler of aluminium, with operations spread across North America, South America, Europe and Asia.
Pai said coal availability in the northern region had been tight during the monsoon quarter, with heavy rains affecting production and power plants in the region drawing more coal amid high temperatures. This had made coal availability for the aluminium sector difficult, he said. "As a result, we had to buy a lot of spot auctions where the prices were very high," Pai said, adding that the e-auction premium on coal in the northern region was as high as 200%.
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Coal inventories at Hindalco's Mahan and Renukoot aluminium smelters, located in Madhya Pradesh and Uttar Pradesh respectively, were currently at 10-11 days, against the normal level of 20-25 days, Pai said. In contrast, the company's Aditya and Hirakud smelters in Odisha had more than a month's inventory, with no supply disruption reported there, he added.
Until its own coal mines become operational, Hindalco is dependent on Coal India's long-term linkages and spot auctions for its requirements, Pai said. The company expects its Bandha and Chakla coal mines in Jharkhand to begin supplying coal around the middle of next year.