Vedanta on right track to ramp up capacity at Lanjigarh alumina refinery

Vedanta Ltd’s proposal for expansion of Lanjigarh alumina refinery was recently cleared by the High-Level Clearance Authority (HLCA), the apex body to approve investments in Odisha. The company plans to expand the capacity to six million tonnes per annum from its current 1 million tonnes.

“Our Lanjigarh refinery expansion will happen in a staggered manner. In Phase-I, we will scale up capacity to four mtpa and we hope to achieve this by March 2020. At full ramp-up, our dependence on imported alumina will trickle to nil”, a senior Vedanta Ltd executive said.

Vedanta imports more than one million tonne alumina each year adding pressure to its total production costs. Vedanta’s aluminium production cost stood at US$2018 per tonne in Q2 FY 2019. Coal availability issues and higher alumina prices due to tight international market added to the production costs. Vedanta projects its average aluminium production cost to be in the range of US$1950-2000 per tonne during FY19.

To get rid of such market volatility, Vedanta is looking at upstream integration for its supply chain. It has proposed to install a caustic soda plant at Dhamra, which got approval from the Odisha government. This is also expected to give support to alumina production costs which increased to US$358 per tonne in Q2 due to increased coal and caustic soda prices. Coal prices have shot up during April-October for non-regulated sectors, chiefly, aluminium and cement.

Vedanta's lack of captive bauxite resources, unlike its peers Nalco and Hindalco Industries has worked as a hurdle in its growth path. Vedanta’s Lanjigarh refinery is fed by bauxite imported from other Indian states and countries like Guinea and Australia. Recently, Vedanta has sealed a long-term bauxite sourcing contract with Odisha Mining Corporation (OMC), according to which, 70 per cent of the bauxite mined by OMC at its Kodingamali mines will be supplied to Vedanta. Vedanta expects to source 250,000 tonnes of bauxite per month from the OMC mine in Q3 FY19.

All these positive developments have generated confidence in its ramp up plans for the refinery, which will permanently secure the availability of alumina, the key input material in aluminium production.