Even amidst the sluggish aluminium demand and low prices caused by the COVID-19 pandemic, Vedanta Limited has been able to trim its aluminium Cost of Production (CoP) in the fourth quarter of FY20 by 20 per cent year-on-year to $1451 per tonne, according to a recent report.
In the full financial year 2020, Vedanta’s aluminium Cost of Production was down by 14 per cent year-on-year to $ 1690 per tonne.
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Reducing aluminium production costs further indicates a positive sign for Vedanta amid a slide in the prices of white metal on the London Metal Exchange. The global consultancy CRU projects further downfall in aluminium prices, attributing to the estimated hike in global inventories by 5 million tonnes to 16 million tonnes, much of it in the non-LME registered warehouses by the end of the CY2020.
Vedanta has been able to achieve this competitive aluminium production cost largely because of the ramp-up in its alumina output. Vedanta, in an investor presentation for the financial year 2020, had said that it achieved a record production of 1.81 million tonnes of alumina at its Lanjigarh refinery in Odisha, which was an increase of 21 per cent year-on-year. The company could also prune alumina production cost by 15 per cent to $275 a tonne, helped by local bauxite sourcing that now meets half of the refinery’s requirement.
Vedanta has a long-term linkage arrangement with Odisha Mining Corporation (OMC) for bauxite supply. OMC’s Kodingamali mine feeds 70 per cent of its mining output to Lanjigarh refinery. Besides, Vedanta is eligible to participate in bauxite e-auctions conducted by the state-run miner twice a year.
In addition, Vedanta’s captive coal mine Chotia achieved the full capacity of 1 million tonnes to supply adequate power to the company’s smelters. This also helped Vedanta cut aluminium production costs. Vedanta also banks on Jamkhani with 220 million tonnes of coal blocks for coal sourcing.
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