Ramp up on new plants has been outstanding: Hindalco chief

The December quarter will go down as one of the challenging times in the history of Hindalco Industries with new capacity going on stream and metal prices dipping to new lows.

D Bhattacharya, Managing Director, Hindalco Industries, in an interaction with BusinessLine said compared to last December quarter the company has lost ₹40,000 per tonne of aluminium produced with average realisation of ₹104,000. Excerpts:

How has the ramp of greenfield projects been?

It was outstanding. The cost of production at these plants have been one of the lowest. It has used less energy to produce aluminium than our old plants.

The new age smelters have matched the designers’ expectations, and in some case, they have done even better.

They have produced 292,000 tonnes of aluminium in December quarter. We have managed to sell the entire production except for the normal inventory we carry. So the whole plant has been tested to achieve the maximum expected in the current phase of expansion.

The third greenfield project Utakal Alumina has outdone the expectations by producing at the annualised capacity of 1.5 million tonnes at the lowest desired cost of production. Input costs have gone in our favour primarily in the area of energy. Brent crude prices have come down sharply along with other energy-related cost. This has helped in bringing down overall cost.

Going ahead, how do you see business panning out?

Mahan Aluminium is fully completed.

Aditya Aluminium is in the process of completion and will be ramped up by mid-March. Aditya has turned out to be one of the most cost efficient plants because of its location and with coal prices holding, I believe the fourth quarter looks promising.

In the meantime, aluminium prices in the LME seems to have bottomed out and therefore, realisation is expected to hold firm, if the cost of production is maintained at the current level.

With the rise in production are you looking at exports?

Though our market share has gone up in India we had to export because we have produced at such a rate that the market has not grown commensurately. Therefore, we had to resort to export. However, with a duty at only five per cent export and domestic market sale does not make much difference. Our objective has been to increase our value added product contribution to sales.

We have increased FRP (flat rolled products) from 38 per cent to 47 per cent and enhance product mix for better realisation.

Even in virgin metal sales, we are producing more premium products.

In our endeavour to sell more value added product, we have put up a FRP plant at Hirakud, which has capability to produce variety of products. We have started ramping up.

What is the capacity of Hirakud plant and by when you will complete ramp up?

The total capacity is 135,000 tonnes. How long it will take to ramp up we cannot say because it is a brand new product for us.

Aditya, Utkal and Mahan have been ramped up brilliantly but downstream products are difficult to stabilise.

We also have foil business where aluminium is converted into foils used for packaging tablets in the pharma sector and consumer industry.

A new plant at Mouda near Nagpur has come up with equipment shifted from Novelis at book value. This plant will come out with products that will be thinner than hair.

These products are used for its barrier properties like in cigarette packs to retain the flavour of tobacco.

The user industry wants to use a thin layer as possible. So we have got the capability of thinner gauge products.

The more thinner we get the better realisation. We will be the only producer of this product in India.

What is the progress of steel industry-like support from the government for aluminium sector?

The aluminium industry is suffering very badly due to both macro economy factors and imports from many Middle East and Chinese companies which is hurting the industry which supports eight lakh worker families.

The government is seized of the matter and expected to do something.

Are you operating all plants at full capacity?

Currently, about 50 per cent of demand in India is met through imports.

The situation has led to 40 per cent aluminium production cut in our Hirakud plant.

Domestic prices are not higher than international prices but some body is selling at a lower price that you cannot compete. This is happening largely due to other drivers like some subsidies.

What is development on bauxite mine in Odisha?

We are currently mining there with all the regulatory approvals.

The mine was allotted to us decades ago. With the new norms kicking in, some more regulatory approvals are required for which we have applied. They have to either issue the approvals before March or extend the timeframe.