Hindalco expects that the costs of aluminum production will increase by another 5 percent compared to the previous quarter in December, following a similar rise recorded in September. This was reported by Managing Director Satish Pai during media interactions after the publication of financial results for the second quarter of fiscal year 27.
Hindalco Industries announced that coal supplies to its two aluminum smelters in northern India have decreased by almost half compared to the usual level, highlighting the pressure exerted by tightening fuel supplies to major industrial consumers.
According to Satish Pai, aluminum production costs in Q2 were 5 percent higher than in Q1, primarily driven by coal and calcined petroleum coke (CP Coke). Coal accounted for 50–60 percent of this increase, while CP Coke made up the remainder.
Expenses are expected to begin declining in the fourth quarter as the coal situation stabilizes and electricity consumption in northern regions decreases during the winter period. The company forecasts that coal availability in northern India will be limited in October and November, but an improvement is anticipated in the fourth quarter.
Hindalco, a flagship metallurgical company of the Aditya Birla Group, holds the position of the world's largest revenue generator in the aluminum sector and the largest copper producer in India. Furthermore, the company manages Novelis, a global leader in aluminum recycling, with operations in North America, South America, Europe, and Asia.
Pai noted that during the monsoon season in northern India, there was a coal shortage because heavy rains negatively affected production, and power plants required more fuel due to high temperatures. This created difficulties for the aluminum sector.
"As a result, we had to purchase many lots on spot market auctions where prices were very high," stated Pai, adding that the premium for coal auctions in the northern region reached 200 percent.
Hindalco has a coal reserve of 10–11 days at the Mahan smelter in Madhya Pradesh and Renukoot in Uttar Pradesh, whereas the normal level is 20–25 days. Conversely, at the Aditya and Hirakud plants in Odisha, reserves exceed one month, and no supply disruptions have been reported.
Pai clarified that before starting its own coal mines, Hindalco will rely on long-term agreements with Coal India and spot market auctions. It is expected that the Bandha and Chakla coal mines in Madhya Pradesh and Jharkhand will begin supplying coal around the middle of next year.
Despite price pressures, Hindalco's upstream aluminum division, which is the company's main source of income in the second quarter, showed an EBITDA of 7,009 crore rupees, which is 55 percent higher compared to last year. The copper production business achieved a record quarterly EBITDA of 1,673 crore rupees, an increase of 164 percent year-on-year.
Novelis' adjusted EBITDA grew by 20 percent year-on-year to US$508 million. Pai reported that production at the Novelis plant in Oswego, USA, has returned to normal levels after disruptions caused by last year's fire.
Hindalco's downstream aluminum division reported an EBITDA of 329 crore rupees, which is 26 percent higher compared to last year. Pai believes that the downstream aluminum business will become a significant contributor to Hindalco's operations in India, generating over 2,000 crore rupees in EBITDA over the next two years.
