Vedanta to ramp up downstream capacity by 25% to combat import and boost revenue

Looking at the surge in imports, metals and mining conglomerate Vedanta Ltd has strategized a plan to raise its downstream products output by 25 per cent in the October-March period.  As U.S. has restricted import of aluminium and aluminium products from China, the country has redirected its exports to other markets. India also has witnessed a flood of imports of an array of aluminium products. While scrap aluminium imports from US have increased 144 per cent, overall imports have risen 32 per cent in July-September period, creating a concern for the domestic aluminium producers. Imports of fake semis from China and wire rods from South East Asia region have also created issues for the Indian aluminium makers.

The share of imports in domestic aluminium consumption has reached 60 per cent in India. This has prompted the domestic manufacturers to either widen their export markets or expand production of downstream products that can work as import substitutes.

Vedanta expects to increase its revenue realization and combat imports through its value-added portfolio expansion.

"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 by 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," said Srinivasan Venkatakrishnan, chief executive officer, Vedanta.

Vedanta is struggling with aluminium production costs due to the last increase in alumina prices and higher coal costs. Despite Vedanta's focus on cost reduction, its cost of production (CoP) for aluminium was on the higher side at US$2000 per tonne because of higher coal costs. Vedanta plans to curb CoP to US$1500 per tonne. Vedanta has secured 3.2 million tonnes of additional linkages from Tranche IV coal auctions and has also started mining at its captive Chotia mine.

Vedanta has also inked a long-term linkage agreement with Odisha Mining Corporation (OMC), under which, 70 per cent of bauxite mined by OMC from its Kodingamali mine will be supplied to Vedanta’s 1 mtpy Lanjigarh alumina refinery. The company expects to ramp it up four mtpa capacity by December 2020.