Coal Shortages Burning Out India’s Aluminium Producers

Coal Shortages Burning Out India’s Aluminium Producers
Jharia coal mine, India. Source: Wikimedia

Acute coal shortages in India are beginning to take their toll on the country’s aluminium producers, as several of the major aluminium firms are unable to obtain sufficient quantities to keep captive power plants in operation.

According to the Aluminium Association of India, the majority of the country’s smelters are facing power shortages, as their power plants typically only have half a day’s worth of coal on hand at any one time. The Association delivered a written appeal to India’s prime minister and the head of its Coal Ministry but, as yet, the petition has fallen on deaf ears.

If coal supplies to aluminium producers continue to be as tight over the remainder of the fiscal year as they have been to date, experts believe aluminium operations will bear the brunt. Jayanta Roy, senior vice-president and group head of corporate ratings at ICRA Limited (ICRA), told Bloomberg earlier this month that profitability will suffer despite the continuing recovery of the global aluminium sector.

Producers are already shutting off equipment as a result of falling coal supplies. National Aluminium Company Ltd. (Nalco) turned off three 120-mW captive power units late last month, as the units, which require a minimum of 17,500 metric tons of coal each day, were only being supplied with 13,000 metric tons daily.

At present Nalco is operating only 875 of its 980 smelter pots, and that is due partly to the firm’s borrowing a substantial slice of its power from the state’s power company.

Sambitosh Mohapatra, partner (power and utilities), PwC India says that India’s aluminium sector is scrambling for solutions in hopes that short-term difficulties don’t evolve into long-term crises.

“Some of these large alumina players are evaluating options for sourcing power on the long-term basis on group captive and open access route. Investing or buying out a distressed asset with appropriate coal linkages might also be a viable proposition.”

For its part, the country’s coal ministry told Bloomberg that the aluminium sector is being supplied an appropriate amount, claiming that the sector is receiving around 12 percent of the country’s total coal production at present.