
A bullish LME aluminium outlook notwithstanding Indian primary aluminium producers are struggling to keep their profits intact. Reason- The spiralling cost of raw materials. From alumina to coal, coal tar pitch and caustic soda every key ingredient of aluminium making has become costlier and this has resulted in a total impact of US$744 per tonne (year-on-year) on overall aluminium production. The effects have been such that the gains from LME aluminium prices have got negated.
Three of India’s top aluminium producers- Hindalco Industries, Vedanta, and Nalco are facing this challenge.
{alcircleadd}“The LME price outlook for aluminium is bullish, but input costs are a pain for the producers,” noted Nalco CMD and Aluminium Association of India (AAI) President TK Chand.

According to AAI data, alumina prices have risen from $271 to $400 per tonne, up 18 per cent YoY. Costs of imported coal and linkage coal have surged by 62 per cent and 18 per cent, respectively. Prices of calcined petroleum (CP) coke and coal tar (CT) pitch have had impacts of $95 and $35 per tonne, respectively, on aluminium production.
The cess and duties on coal, electricity, renewable power and CP coke have also gone up significantly in the past three-four years leading to an increase of more than 10 per cent in the aluminium cost of production.
Leading Indian daily Business Standard estimates that the annual impact on aluminium producers at the current output of three million tonnes per annum (mtpa) is approximately INR 30 billion. If the aluminium smelters are run at the full-rated capacity of four mtpa, the impact could be to the tune of INR 40 billion.
Capacity closures in China and appreciation of Indian Rupee vis-à-vis US dollar have also added to the cost concerns.
Vedanta’s CoP was higher by 22 per cent over the previous year at US$1798 per tonne. “We expect our aluminium production cost to mount further to $1,850-1,900 a tonne due to challenges related to coal and other input commodity inflation,” a source close to Vedanta said.
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