Compared to the aluminium smelters in West Asia, which benefit from low-cost natural gas, and those in Europe and Canada which benefit from hydropower, India's white metal production is solely dependent on significantly more expensive coal-fired energy. However, this country has a distinct edge over most other manufacturing centres in terms of the availability of high-alumina bauxite deposits. In 2020, China, the world's greatest producer of aluminium, will account for 56.67 percent of the worldwide output of 64.76 million tonnes, while its consumption of 37.77 million tonnes will account for 60.14 percent of the global total of 62.80 million tonnes. China has to import massive amounts of bauxite and smelter feedstock alumina to keep its massive aluminium sector afloat.
Odisha alone possesses 51% of the country's 3,897 MT of bauxite deposits; Advantageous for aluminium companies in India
Even though last year China mined roughly 70 million tonnes of bauxite, it needed to import 112 million tonnes to produce 73 million tonnes of alumina. However, this was insufficient to fulfil the complete requirements of smelters for the intermediate chemical alumina, prompting the country to import 3.84 million tonnes. China will continue to be a large importer of bauxite due to crackdowns on illicit mining, poor quality of local ore, and pressure to limit mining-related pollution. This is why China is significantly investing in mining and infrastructure development in Guinea, which controls more than a quarter of the world's bauxite deposits, the majority of which is very alumina rich.
In contrast to China, India's bauxite ore, while not of the same quality as Guinean ore, has not prevented Hindalco subsidiary Utkal Alumina International (UAI) and the government-owned National Aluminium Company (NALCO) from becoming among the world's lowest-cost alumina producers. Their ownership of long-term bauxite deposits in the Baphlimali and Panchpatmali hills, respectively, the cost-effective and environmentally friendly system of transferring ore from mines to refineries via single flight multi-curve conveyors, and periodic technological interventions to improve Bayer's process technology in use in refineries are the reasons for their very low alumina production costs.
Vedanta, on the other hand, will match its two Indian competitors in terms of refinery operational efficiency, but it will lose out on overall refining cost due to its high reliance on external alumina sources. Compared to UAI and NALCO, which secure all of their bauxite from their mines, Vedanta's captive ore supply is less than 10 percent. The discrepancy between Vedanta's US$235 per tonne alumina production cost and NALCO's US$178 per tonne alumina production cost in 2020 can only be bridged when the former starts receiving 100 percent bauxite ore from captive mines.
Despite changes enacted through the 2015 Mines and Minerals (Development and Regulation) Amendment Act, Vedanta Aluminium CEO Rahul Sharma laments that no bauxite deposit has been sold in the recent six years. According to Sharma, the nation spent Rs 5,300 crore ($765 million) on bauxite imports during this time.
“Based on the progress of exploration, the government will be in a position to auction seven to ten mines, each containing deposits between 100 mt and 150 mt, in the New Year. We have recently announced our mega alumina refinery capacity expansion programme and, therefore, Vedanta’s hunger for bauxite is so much more heightened. Against this background, expect us to place strong bids at all auctions,” said Rahul Sharma.
Odisha is home to one recently completed expansion by UAI, which added 500,000 million tonnes to become a 2 million tonnes refinery, as well as alumina capacity expansions proposed by Vedanta and NALCO at their current locations. This is exactly as it should be. The eastern coastal state alone controls 51 percent of the country's 3,897 million tonnes of bauxite deposits. Odisha also has the second-largest coal reserves in the country, second only to Jharkhand.
According to Chairman Sridhar Patra, NALCO has provided an extra push in the post-second Covid wave to guarantee that the long-awaited 1 million tonnes fifth stream is integrated into the 2.275 million tonnes running alumina refinery at Damanjodi by the second quarter of 2023-24. The company's objective is to make up for the time lost since the breakout of Covid-19 in March 2020. Meanwhile, Vedanta plans to expand its Lanjigarh refinery by 3 million tonnes to 5 million tonnes, making it one of the world's largest single-site alumina complexes.
NALCO benefits from government handouts in the form of bauxite and coal resources from time to time as a PSU. New Delhi, for example, has given the business a 110 million tonnes high-grade bauxite deposit at Pottangi to power the Damonjodi refinery's fifth stream. The fifth refinery stream will be commissioned at the same time as ore extraction from Pottangi. Patra has a backup plan in place to take care of ore requirements for refinery development in the pipeline till the mineral starts pouring out of Pottangi. NALCO and Vedanta are planning to develop downstream smelters as well as create a new alumina refining capacity.
Vedanta plans to expand its Jharsuguda smelter from its current capacity of 1.6 million tonnes to a capacity of 2 million tonnes through brownfield development, according to Sharma. In the following 24 months, BALCO's capacity will be increased to 1 million tonnes from 570,000 million tonnes. Patra, unlike some of his predecessors, does not believe in travelling to town to announce any growth without first getting approval from the government and the board of directors. However, NALCO is actively investigating the construction of a brownfield smelting capacity of 500,000 million tonnes at Angul, where it now operates a 460,000-tonne facility.
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