- Vedanta's Balco seeks government approval to close unit
- Closure of rolling unit to cut 1,000 direct, indirect jobs
Vedanta Ltd., India’s biggest aluminum producer backed by billionaire Anil Agarwal, plans to close a unit as a slump in metal prices and rising energy costs made operations unviable.
Its unit Bharat Aluminium Co., or Balco, has sought the approval of Indian authorities to close the metal rolling mill facility in eastern Chhattisgarh state by Dec. 8, the company said in an e-mailed statement. The decision to close the unit comes more than a month after it delayed a plan to add capacity at its new smelter in the same location.
Vedanta is among producers hurt by a supply glut from Chinese exporters as prices on the London Metal Exchange plunged to a six-year low last month. The light-weight metal used in beverage cans, aircraft and automobiles has slumped 18 percent in the past year and is forecast to extend declines into 2016, according to Harbor Intelligence.
“The closure of the rolling mill is in the backdrop of a crash in global aluminum prices and the prohibitive cost of coal to run our power plants,” Ramesh Nair, chief executive officer at Balco, said in the statement. Despite a drop in coal prices globally, costs at Balco rose as it could not secure fuel linkage and was also facing regulatory issues in starting its own coal mines, which made operations “economically unviable.”
About 55 percent of Indian aluminum consumption is met through imports, forcing domestic players to operate at only 50 percent of their installed capacity, according to the statement. Closure of the rolling mill will lead to a loss of about 1,000 jobs.
Balco, which won the Chotia coal mine in the first ever government auctions earlier this year, hasn’t yet received government clearances to start operations, according to the statement.
Parent Vedanta Resources Plc on July 31 said it was putting on hold a planned expansion of a new smelter.
“We are very mindful of weak aluminum prices and premiums, so at this moment we’re looking at all parts of our refining and smelting business,” Vedanta’s Chief Executive Officer Tom Albanese said in a sales and revenue call on July 31. “Now we are prepared to make difficult decisions, even reducing production, if necessary, to protect cash flow.”
On Aug. 25, it began notifying stakeholders including employees about the economic unviability of the refinery at Lanjigarh in Odisha state, Abhijit Pati, chief executive officer of Vedanta Ltd.’s aluminum business, said on Aug. 26.
Chicago-based Century Aluminum Co. last month warned about possible suspension of production, while Alcoa Inc., the biggest U.S. maker, said in July that it will continue “to optimize the portfolio” after closing about 30 percent of its smelting capacity since 2007.