Indian aluminum mills get fewest coal rail rakes in six months

Railway rakes supplying coal to India’s aluminum plants have dropped to the lowest since the peak of an energy crisis in September, forcing the industry to import more amid rising cost pressures.

The industry got an average of 18.4 coal-laden carriages a day in the first half of March, the lowest since the 17.8 rakes it received in September, according to data provided by Coal Minister Pralhad Joshi in a written reply to Parliament. Coal is supplied to power plants in India through railways and roads, but buyers located far from mines prefer the trains as road transport is costlier.

Tighter supplies of coal to the aluminum industry, the biggest consumer among non-power producers in India, comes at a time when the sector is already reeling under surging oil and gas prices. State-run monopoly Coal India Ltd. is diverting more supplies to power plants to avoid a repeat of last year’s shortage, prioritizing citizens over industries.

An uninterrupted power supply is critical for the aluminum mills as it is a continuous process industry, and an outage can cause the molten metal in the pot line to become solid, causing months of shutdowns. The Aluminum Association of India has been seeking government intervention to normalize the situation by earmarking atleast 25-30 coal rakes a day to the sector.

Coal stockpiles at different captive power plants of aluminum mills have fluctuated depending on the demand-supply scenario. Inventories at the state-run National Aluminum Co. are enough for 10 days, and supplies at Vedanta Ltd.’s Balco have improved from 3-4 days in September to present levels of 9-10 days, Joshi said in the statement.

Coal India has supplied 112 million tons of coal in the 11 months to February to the non-power sector compared with 116.4 million tons in the year-earlier period, Joshi said. 

That is coming at a high cost too. Customers paid Coal India an average premium of more than 340% above baseline prices in two sales this month, according to people familiar with the results, who requested anonymity as they are not permitted to speak publicly. That compares to premiums of about 100% in auctions in January.