Vedanta Aluminium plans to significantly boost the share of value-added aluminium products in its portfolio from 55% now to over 90%, as part of the mining company’s broader push to tap into India’s fast-expanding construction and electric vehicle markets.
This shift will also help boost margins significantly, said John Slaven, chief executive of Vedanta Aluminium, in an interview with Mint.
“We go from 55-60% of our mix as value-added products to 85…90…95%. That will enable us to go from $250 per tonne to $350 and higher as a net effective premium,” Slaven said, as he prepared to launch two value-added aluminium products in the Delhi-National Capital Region on Wednesday.
Vedanta Aluminium, currently a subsidiary of the Anil Agarwal-led Vedanta Ltd, produced 2.37 million tonnes of raw metal in 2023-24, which was roughly more than half of India’s total production. Its value-added products include components used in construction or in the automotive sector such as ingots, slabs, or rods.
(Vedanta Aluminium will become an independent listed company following a six-way demerger of the main entity, which, according to Slaven, is expected shortly.)
With aluminium prices expected to rise due to the increasing cost of setting up capital-intensive smelters, businesses are likely to demand premiums, Slaven said.
“My considered view is that prices will go up in the medium to long term,” he said, adding that Vedanta Aluminium, which produces over half of India’s aluminium, was well-positioned to benefit from this trend through its focus on high-margin, value-added products.
The price of raw aluminium traded on the London Metal Exchange, a global benchmark for prices, has risen roughly 10% over the past year to about $2,350 per tonne. Since value-added aluminium products undergo additional processes, they have a higher price than raw aluminium.
EVs driving aluminium demand
India, the world’s third-largest aluminium market, consumes about 5 million tonnes of the metal annually, driven primarily by the construction sector. Demand from the electrical sector is also growing significantly, Slaven said, adding that this was proving to be a “major driver of growth”.
Slaven also highlighted the growing impact of electric vehicles, particularly four-wheelers, on the aluminium industry.
“I think (electric) four-wheelers is where we expect to see the largest growth. There’s more (aluminium) content per vehicle than in a two-wheeler. And then also, as the four-wheelers become electrified, there’s more aluminium per EV than there is per IC(internal combustion) engine,” he explained.
Aluminium, a highly recyclable material, is a key component in manufacturing electric vehicles primarily because it is lighter than steel, which allows for higher efficiency and distance per charge.
India’s push to promote wider use of electric vehicles is expected to further boost demand for aluminium. On Wednesday, the government launched the PM E-Drive Scheme with a ₹10,900 crore outlay over two years to promote the manufacturing and adoption of electric vehicles, particularly e-buses, e-trucks, and hybrid ambulances.
A green wave
Slaven added that Vedanta Aluminium was focused on developing capacity to manufacture more aluminium products, including green aluminium, to meet growing demand from global and Indian construction and automotive sectors.
“The automotive industry is very focused on green (aluminium), as is the packaging industry, consumer electronics, so anything where consumers are making choices about what is considered sustainable versus not,” Slaven explained, highlighting the increasing demand for environmentally friendly aluminium.
To keep pace with this expected surge in demand, Vedanta Aluminium plans to expand its production capacity from 2.37 million tonnes to 3.1 million tonnes by ramping up operations at its Bharat Aluminium Co. (BALCO) facility.
The company is particularly focused on selling to the rapidly growing Indian market. Slaven expressed confidence that domestic consumption of aluminium will double in the coming years, and emphasized the financial benefits of prioritizing local sales over exports.
“Our profitability of selling to the domestic market is much greater than the export market. We don’t have to pay seaborne freight, we don’t have to pay import tariffs, that’s before CBAM, etc. So it’s much more profitable to sell domestic, and we want to be supporting the growth of the Indian market,” Slaven said. “We think it’s going to be a real boost to the overall top line as well, as we sell more domestically.”
Both aluminium and steel will fall under the European Union’s upcoming Carbon Border Adjustment Mechanism (CBAM), which is forcing Indian metals companies to secure renewable energy deals to reduce their net carbon emissions to avoid penalties.
Also read | EU’s carbon border tax poses a big challenge for Indian businesses
Currently, green aluminium constitutes about 6% of Vedanta Aluminium’s total production. Slaven said the company aims to increase this to 30% by 2030, powered by the 1.37 gigawatts of renewable energy it has already contracted.
Additionally, Vedanta Aluminium plans to raise its topline revenue by increasing aluminium production by 10% at its two mines in Chhattisgarh and Odisha, he said.
Vedanta demerger: the last major hurdle
Asked about the timeline for Vedanta’s demerger, Slaven said it is expected to be completed within a few months, pending approval of the company’s application by the National Company Law Tribunal. Vedanta announced it plans to demerge into six independent companies in September last year.
Also read | Vedanta demerger: Key lenders signal green light after months of deliberation
“NCLT process is underway. It will culminate in a meeting with the shareholders and also with the lenders to get the approvals of both of those stakeholder groups,” Slaven said. “That process typically takes four months or so. We filed probably about a month ago now, so that was the last sort of major hurdle.”