Vedanta halts production at Korba plant as aluminium prices slump

Falling metal prices have taken their first toll with Anil Agarwal-owned Vedanta deciding to suspend aluminium production at its Korba facility in Chhattisgarh.

The company is also unsure about continuing production at its aluminium factory at Lanjigarh in Odisha.

The two plants have a capacity of about a million tonnes.

The decision to suspend production at the rolling mill at Chhattisgarh was taken after aluminium prices plunged below the production cost. The plant employs about 500 people, who now face an uncertain future.

Speaking to BusinessLine , a company’s spokesperson said the issues relating to mining bauxite and falling aluminium prices have hurt realisations.

The company will soon take a call on continuing production at Lanjigarh in Odisha as its wait for auction of bauxite mine is getting longer.

Currently, the Lanjigarh unit imports bauxite and alumina to process them into aluminium, but the recent depreciation of the rupee and logistics issues pose a major challenge. The devaluation of the yuan will also make exports from China attractive and wipe out the competitive edge of shipments from India.

“The Aluminium Association of India will be meeting the Mining Minister and senior government officials on Wednesday to find a solution to distress state of the industry,” said the company spokesperson.

Aluminium prices on the London Metal Exchange were down to $1,769 a tonne ($1,798 a tonne) while the premium crashed to $198 a tonne from $374 due to excess supply.

Though India is a net exporter of aluminium, the domestic industry faces a tough challenge from cheap imports from West Asia and China.

With fresh production capacity near the coal belts in the northern part of China going on stream, the recovery in aluminium prices may not happen in the near future.

This is putting pressure on mining and minerals companies such as Vedanta, already reeling under heavy debt.

On Monday, Vedanta said it plans to raise ₹2,000 crore through non-convertible debenture. The fund will be used to repay high cost debt and extend the repayment period of short-term liabilities.