Hindalco flags coal shortage, expects 5% rise in aluminium production costs | Company News

Hindalco Industries said coal supply at its two aluminium smelters in northern India has fallen to nearly half their normal levels, underscoring how tightening fuel supplies are weighing on major industrial consumers.

The company expects aluminium production costs to rise another 5 per cent sequentially in the December quarter (Q3), after a similar increase in the September quarter (Q2), managing director Satish Pai said on Friday during a media interaction after Q2 FY27 financial results. The company expects coal availability will be tight in northern India during October and November, with easing expected in the fourth quarter.

Hindalco’s aluminium production costs in Q2 were 5 per cent higher than in Q1, largely due to coal and calcined petroleum coke (CP Coke), Pai said. Coal accounted for 50-60 per cent of the increase, while CP Coke made up the remainder. Pai said costs should begin to ease in Q4 as the coal situation settles and power demand in northern areas declines during winter.

Hindalco reported a 59 per cent year-on-year rise in consolidated net profit to a record ₹7,533 crore for Q2 FY27. Revenue increased 39 per cent to ₹91,708 crore, while earnings before interest, tax, depreciation and amortisation (EBITDA) grew 42 per cent to ₹13,757 crore.

Hindalco, the metals flagship company of the Aditya Birla Group, is the world’s largest aluminium company by revenue and India’s largest copper producer. The company also operates Novelis, the world’s largest recycler of aluminium, with operations in North America, South America, Europe and Asia.

Pai said coal availability in northern India was tight during monsoons, with heavy rains affecting production and power plants drawing more fuel amid high temperatures. This made coal availability difficult for the aluminium sector, he said.

“As a result, we had to buy a lot of spot auctions where the prices were very high,” Pai said, adding that the e-auction premium on coal in the northern region was as high as 200 per cent.

Coal inventories at Hindalco’s Mahan smelter in Madhya Pradesh and Renukoot in Uttar Pradesh are at 10–11 days, against a normal level of 20–25 days, Pai said. In contrast, the company’s Aditya and Hirakud smelters in Odisha had more than a month’s inventory, with no supply disruption reported.

Until Hindalco’s own coal mines become operational, it will depend on Coal India’s long-term linkages and spot auctions, Pai said. The company expects its Bandha and Chakla coal mines in Madhya Pradesh and Jharkhand to begin supplying coal around the middle of next year.

Despite the cost pressures, Hindalco’s upstream aluminium business, the largest contributor to the company’s Q2 performance, reported ebitda of ₹7,009 crore, up 55 per cent year-on-year. The copper business reported record quarterly ebitda of ₹1,673 crore, up 164 per cent year-on-year.

Novelis’s adjusted ebitda rose 20 per cent year-on-year to $508 million. Pai said production at Novelis’ plant in Oswego, USA. had returned to normal levels after disruptions due to a fire last year.

Hindalco’s aluminium downstream business reported ebitda of ₹329 crore, up 26 per cent year-on-year. Pai expects the downstream aluminium business to become a significant contributor to Hindalco’s India operations, generating more than ₹2000 crore in ebitda over the next two years.