India's NALCO may cut output due to coal shortage

BHUBANESWAR, India, June 19 (Reuters) - India's National Aluminium Co Ltd (NALCO) (NALU.BO: Quote, Profile, Research) may cut production if coal shortages continue, a senior official said on Thursday, raising prospects of tighter spot market supply.

India's No. 2 aluminium producer, state-run NALCO, has not received coal since Monday due to a truckers' strike at its coal suppliers, forcing it to shut down one of the seven power units that feed its smelter in Angul in the eastern state of Orissa.

"Aluminium production in NALCO has not been affected so far but if this situation continues for some more time then it may get affected," Arun Sharma, executive director of the Angul unit, told Reuters.

If the coal supply did not resume immediately, NALCO may shut down one more unit in a day or two, Sharma said.

The energy-intensive metal used in power, packaging and transport has spiked back above $3,000 on worries about supplies from China, the world's top producer and consumer.

Aluminium MAL3 was $5 up at $3,085 a tonne on Thursday, after touching its highest in almost two months at $3,122 on Wednesday.

"This has the potential to tighten the spot market if NALCO is forced to cut production," Barclays Capital said in a note.

Sharma said NALCO's coal reserves were already down to a critical level as its supplier, Mahanadi Coalfields Ltd, had cut the daily coal supply by 14-29 percent from 14,000 tonnes in the past 2-1/2 months, Sharma said.

The supplies had fallen due to troubles with Mahanadi Coalfields's conveyor belt and restricted timings during summers. (Writing by Nidhi Verma)