Hindalco Industries Ltd (NSE: HINDALCO) Q3 2025 Earnings Call dated Feb. 14, 2025
Corporate Participants:
Subir Sen — Head of Investor Relations
Satish Pai — Managing Director
Steve Fisher — President and Chief Executive Officer
Devinder Ahuja — Chief Financial Officer
Analysts:
Sumangal Nevatia — Analyst
Tarang Agrawal — Analyst
Ashish Jain — Analyst
Indrajit Agarwal — Analyst
Amit Dixit — Analyst
Satyadeep Jain — Analyst
Pathanjali Srinivasan — Analyst
Raashi Chopra — Analyst
Parthiv Jhonsa — Analyst
Prateek Singh — Analyst
Amit Murarka — Analyst
Somaiah Valliyappan — Analyst
Ashish Kejriwal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Hindalco Industries Financial Year 2025 Third Quarter Earnings Conference call. [Operator Instructions]
I now hand the conference over to Mr. Subir Sen, Head of Investor Relations at Hindalco. Thank you, and over to you sir.
Subir Sen — Head of Investor Relations
Thank you, and a very good afternoon or morning, everyone. On behalf of Hindalco Industries, I welcome you all to the Earnings Call for the Third Quarter of Financial Year 2025. In this call, we’ll refer to the Q3 financial year 2025 investor presentation available on our company’s website. Some of the information on this call may be forward-looking in nature and is covered by the Safe Harbor language on Slide number 2 of the set presentation.
In this presentation, we have covered the key highlights of our consolidated performance for the third quarter of financial year ’25 versus the corresponding period of the previous year. A segment-wise comparative financial analysis of Novelis Indian Aluminium and Copper business is also provided. The corresponding segment information of prior periods have also been reinstated accordingly for a comparative analysis.
Today we have with us on this call from Hindalco’s management, Mr. Satish Pai, Managing Director; and Mr. Praveen Maheshwari, Chief Financial Officer. From Novelis’ management we have Mr. Steve Fisher, President and CEO; and Mr. Dev Ahuja, Chief Financial Officer. Following this presentation, this forum will be open for question-and-answers. Post this call, an audio replay of this conference call will also be available on our company’s website.
Now let me turn this call to Mr. Pai to take you through our company’s performance for the third quarter of fiscal 2025.
Satish Pai — Managing Director
Thank you, Subir. Let me start this call by giving the good news that Hindalco is the only company to achieve the top 1% ranking in the S&P Global Sustainability Yearbook 2025 with the highest ESG score in the aluminium sector. This recognition emphasizes our unwavering commitment and a comprehensive strategy towards long-term ESG Excellence.
On slides 4 to 8 of this presentation, you can see our achievements and progress across metrics for ESG for this year versus the prior year.
I will now take you through some of the key highlights in this quarter. For the first nine months, 79% of the total waste generated were recycled and reused. We achieved recycling of 109% of bauxite residue excluding Utkal, 101% of ash in this period. We are proud to share that Aditya, Mahan, and Renusagar facilities have achieved zero waste-to-landfill certification this quarter, taking Hindalco’s total number of zero waste-to-landfill certified units to six.
Water conservation remains a key focus area for us. As of date, 16 of the 19 Hindalco sites now meet zero liquid discharge standards with Kuppam facility successfully meeting the ZLD standard during this quarter. We also have made significant progress in water recycling with 14.37 million cubic meters of wastewater being recycled and reused. This is 26% of the 55.5 million cubic meters which is the total water consumed in the first nine months.
Further, we are continuing our journey towards water positivity while working with CII Triveni under NITI Aayog’s Water Positivity Framework for which the certification assessments for five of our manufacturing units at Aditya, Utkal, Hirakud, Alupuram, and Belagavi are underway. These initiatives highlight our dedication towards efficient resource management and commitment to support sustainability in the communities where we operate.
Our biodiversity conservation efforts remain strong. In Q3 FY25 we completed a pilot project at Utkal for the removal of invasive species of nonnative plants and 20 tonnes of these were sent to paper mills for them to utilize. Additionally, biodiversity management plans are in progress for seven of our plants and 11 of our mines. These biodiversity management plans have already been implemented across 22 of our locations covering 10 plants and 12 mines.
While we continue to expand our green cover with accumulative total of 5.4 million trees that are planted till date spread across 6,271 acres of green belt development across all our operations.
Our total renewable energy capacity is 190 — 189 megawatts primarily solar and wind. Recently we commissioned a 6.3 floating solar capacity at Mahan. We are set to add another 9 megawatts of solar and 100 megawatts of hybrid capacity with storage in the first half of calendar year ’25. Post this we are well aligned towards our target of reaching 300 megawatts of renewable capacity in the first half of calendar year ’25.
We are also developing another 20 megawatts hybrid capacity of solar and wind which is expected to be operational in the second half of FY26.
Our aluminium-specific GHG emissions in the first nine months of FY25 were recorded at 19.48 tonnes of CO2 per ton of aluminium. This was a bit higher compared to the same period last year on account of higher power consumption at some of our smelters that were impacted by disruptions in the power plants. We expect this to settle down with improved efficiency in the coming quarters.
Safety is a top priority at Hindalco and I am pleased to report that there were no fatalities this quarter across all our operations. Our LTIFR in the first nine months stood at 0.28 slightly higher than the same period last year due to increased project-related activities.
Let me now give you a glimpse of our quarterly consolidated performance this quarter versus the same quarter of last year on Slide 10. Our consolidated business segment EBITDA was up 18% year-on-year at INR8,246 crores whereas our overall reported EBITDA was up 28% year-on-year at INR8,108 crores this quarter. The consolidated net profit after tax was up 60% on a year-on-year basis at INR3,735 crores this quarter.
At the Hindalco India business level, our overall reported EBITDA was up 69% year-on-year at INR4,773 crores this quarter. The net profit after tax was up by 134% on a year-on-year basis at INR2,885 crores.
Our Indian aluminium business for quarter four — in our Indian aluminium business for Q4 FY25 we are currently hedged at around 35% of the commodity at a price of $2,600 per ton and around 15% of the commodity at the zero collar with the bottom at $2,262 and a ceiling at $2,558 and currencies hedge 16% at INR88.
On the balance sheet side, our consolidated net debt stands at INR41,818 crores. In Indian operations, we have a net cash of INR1,952 crores while Novelis’ net debt stands at INR44,716 crores at the end of December ’24.
Hindalco at the consolidated level continues to maintain a strong balance sheet with a net debt to EBITDA well below 2 times at 1.33 times at the end of December 2024 which is lower than the corresponding period of the last year. All our strategic capex in India are mapped with cash flow generations in the business.
Coming to our business-wide performance this quarter, Novelis shipment was at 904 KT versus 910 KT in the prior year down 1% year-on-year. Novelis delivered a quarterly EBITDA of $367 million down 19% year-on-year due to high aluminium scrap prices and unfavorable product mix.
The result in EBITDA per ton stood at $406 versus $499 in the previous quarter — previous quarter year, down 19% year-on-year. All our expansion projects including Novelis Bay Minette project are progressing well and as planned. A new 100 KT recycling center at Ulsan is being commissioned and our automotive plant at Guthrie is now fully operational.
On Hindalco India’s upstream aluminium performance this quarter, shipments were up 1% year-on-year and revenues were up 25% year-on-year. This quarter we achieved a record quarterly EBITDA which was up 73% year-on-year at INR4,222 crores, primarily driven by low input costs and favorable macros. The result in EBITDA per ton was at $1,480 which was higher by 68% year-on-year. EBITDA margins were also at a record high of 42% this quarter and continue to be among the best in the global industry.
This quarter the Indian downstream aluminium quarterly shipments were up 10% year-on-year at 99 KT on account of market recovery. EBITDA was up 36% year-on-year at INR150 crores this quarter versus INR110 crores in the prior period driven by higher volumes and realization. The result in EBITDA per ton was $179 higher by 22% year-on-year this quarter.
Our copper business continues to deliver strong performance this quarter as well. The overall metal shipments were at 120 KT, up 1% year-on-year of which CCR volumes were at 95 KT, up 1% year-on-year this quarter. Our quarterly copper EBITDA stood at INR777 crores, up 18% year-on-year on account of higher byproduct realization and favorable macros.
Now let me give you a glimpse of the current broader economic environment from slides 12 and 13. In 2024, the global economy witnessed resilient growth with inflation moving closer to central bank targets. For FY25 and ’26, global GDP is projected to remain steady at 3.3%, up slightly from 3.2% in 2024 as per IMF.
Growth prospects vary significantly across regions. Growth in the US is expected to remain resilient with GDP growing 2.7% in 2025 versus 2.8% in 2024 and the euro area is expected to recover moderately from 0.8% in 2024 to 1% in 2025. In contrast, China’s GDP growth is expected to moderate further to 4.6% in 2025 from 5% in 2024. However, the outlook is tempered by a fragmented and protectionist trading environment and inward-looking policies which may dampen economic activity and drive inflation up with repercussions for emerging economies. Monetary policy easing therefore will be carefully calibrated to ensure inflationary pressures are durably contained.
The extent of easing will remain data-dependent and cognizant of geopolitical risk until underlying inflation fully subsides. Global headline inflation is expected to moderate from 5.8% in 2024 to 4.2% in 2025. Amid a challenging global environment, Indian economic growth moderated to 6% in the first half of FY25. Growth slowdown was led by moderation in investment in urban consumption. Recent high-frequency indicators present a mixed picture with economic activity expected to moderately [Phonetic] pick up in the second half ’25 driven by festive demand.
The RBI projects FY26 GDP growth at 6.7%, driven by a recovery in household consumption and industrial activity from an estimated GDP growth of 6.4% in FY25.
Headline inflation is projected to ease to 4.8% in FY25 and further to 4.2% in FY26, gradually aligning with central bank targets. Headwinds from adverse trade policies, financial market uncertainty, and volatility in commodity prices are key downside risk to this outlook. By this, FY26 has been able to carefully balance consumption, capex, and fiscal consolidation with a clear focus on ease of doing business which is expected to provide a positive flip to growth. Given the growing inflation dynamics, RBI reduced policy rates by 25 bps to 6.25% in its latest monetary policy review.
Moving to the aluminium industry outlook on slides 14 and 15. Starting with Slide 14. In China, production increased to 10.9 million tonnes while consumption increased to 11.6 million tonnes resulting in a deficit of 0.7 million tonnes in Q4 of calendar year ’24. This demand growth was driven by three key factors; surge in solar installation, strong growth in new energy vehicle production, and a 24% increase in semi-fabricated products export in anticipation of the cancellation of 13% VAT rebate on exports. However, challenges persisted in the construction sector where investments continued to decline this quarter.
Moving on to the rest of the world. Production in this quarter increased to 7.5 million tonnes while consumption stood at 7 million tonnes resulting in a surplus of 0.5 million tonnes. Consumption in Western Europe remained weak whereas markets such as India, Thailand, Vietnam, Brazil, US, Turkiye, and Mexico exhibited growth. As a result, the overall global aluminium market recorded a marginal deficit of 0.2 million tonnes in quarter four of calendar year ’24.
Turning to India on Slide 15. Aluminium demand in Q3 FY25 is projected at 1,403 KT, reflecting a robust 11% year-over-year growth. The key demands are in the electrical segment, especially cables and conductors, solar panels, strong demand in the packaging and consumer durable segment, and a stable demand in building and construction segments. However, in the automotive sector, demand was moderate due to weaker offtake in commercial vehicles.
Imports excluding scrap increased primarily on account of higher imports of solar frames and in primary aluminium in the form of alloy ingots and wire rods. The Global FRP Aluminium, FRP demand excluding China is expected to grow by 5% in calendar year ’25 with demand recovery across all major segments of beverage packaging, automotive specialty, and aerospace between a CAGR of 4% to 6% over the next three to four years. The beverage packaging sector shows strong growth driven by favorable consumption and sustainability trends.
Automotive growth reflects steady to positive outlook for aluminium in North America. Electric vehicles continue to gain share globally but are growing at a more tempered pace. Specialty products aligned with the global GDP growth supported by a strong building and construction backlog though tempered by high interest rates and softer automotive specialty product demand. Aerospace remains strong with high orders despite OEM supply chain constraints, impacting the production of new aircraft.
The Indian FRP demand in financial year FY25 is expected to grow by 20% on a year-on-year basis, spread by — led by strong demand from the packaging and consumer durable segments.
Turning to the copper industry on slides 17 and 18. In Q4 calendar year ’24, Chinese production reflected a growth of 3% year-on-year, reaching 3.1 million tonnes while consumption increased by 6% year-on-year at 4.1 million tonnes, resulting in a deficit of 1 million tonnes.
In the rest of the world, production increased by around 3% year-on-year at 3.7 million tonnes, while consumption increased by 2.7% year-on-year at 2.8 million tonnes leading to a surplus of 0.9 million tonnes in Q4 calendar year ’24.
As a result, the overall global production of copper increased by 2.8% year-on-year at 6.8 million tonnes and consumption increased by around 4.8% year-on-year at 6.9 million tonnes, leading to a deficit of 0.1 million tonnes this quarter.
On the domestic front, in Q3 FY25, market demand increased by 4% year-on-year at 206 KT versus 198 KT in Q3 of FY24. The domestic producer share increased to 76% in Q3 FY25 versus 67% in the same period last year.
The concentrate TCRCs remain under pressure due to continued deficits expected in 2025. Major Chinese smelters settled the 2025 annual TCRC benchmark with large global miners at $0.054 per pound, representating a 73% year-on-year decline from $0.205 per pound in 2024. Uncertainty remains whether smelters outside China will adopt the same benchmark term. The issuance of export permits for Indonesian copper concentrate as and when granted will increase the concentrate supplies in the market and shall help support the spot TCRCs in the short term.
Details of the operational and financial performance in each of our business segments this quarter compared to the corresponding period last year as well as previous quarters are covered in further slides and annexures to this presentation.
Let me now conclude today’s presentation with some key takeaways. Our Indian operations continue to deliver strong results driven by robust market conditions, better efficiencies, and disciplined cost control. In this quarter we achieved a record quarterly aluminium EBITDA alongside consistent performance by our downstream businesses.
To further enhance resource securitization and cost efficiency, Hindalco has successfully secured the Meenakshi coal mine with a capacity of 12 million tonnes per annum. This strategic move shall significantly improve our self-sufficiency, ensuring a stable and continuous supply of captive coal to our captive power plant.
On our organic expansion projects in India, the Aditya FRP project remains on track for commissioning in FY26 which will increase our total downstream capacity to 600 KT per annum. We are also set to commission the 25 KT Copper Inner Grooved Tube plant this month. This will add — this will help enhance our product portfolio and strengthen our position in the growing value-added segments in both aluminium and copper.
Coming to Novelis, our 600 KT Greenfield Bay Minette project remains on schedule with completion expected in the second half of calendar year 2026. Of the 600 KT, 420 KT is now fully contracted to beverage packaging, and the balance 180 KT is primarily allocated for automotive application with flexibility for other flat-rolled products. Despite muted demand in the specialty and European/Chinese automotive segment, beverage package shipments continue to grow strongly, helping to balance our overall performance.
We remain focused on expanding our recycling capacity and leveraging new technologies and strategic partnerships to increase our recycled input. At the same time, we are also engaged in cost control measures and initiatives to improve operational efficiency to mitigate the ongoing pressure on scrap prices.
In January 2025, Novelis successfully issued $750 million in senior unsecured notes due in 2030. This will help further strengthen our financial flexibility and support long-term growth.
Thank you very much for your attention. The forum is now open for any questions you may have.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from Sumangal Nevatia from Kotak Securities. Please go ahead.
Sumangal Nevatia
Yeah, thank you for the opportunity, and congratulations on another consistent strong performance. First question, sir, is on coal. If you could share what was our coal mix? How do we see the coal cost changing in the coming quarter?
And then if you could just update us with respect to our two captive coal mines timelines.
Satish Pai
Sumangal, yeah. Coal cost Q2 to Q3 was flattish. Linkage coal is around 50%, e-auction is around 50%. So more or less the same mix as Q2. We have adequate coal stocks and probably quarter four coal will also be more or less similar, maybe little bit lower than Q3. So that’s on the coal cost.
And if I look at the mines now, Chakla box cut still we should be doing calendar year sometimes in Q3 to Q4. So Chakla is on track.
Meenakshi, we have just got allocated. So now we have to start the environmental clearance, forest clearance. So it will be about two years. But this mine is significantly crucial to Hindalco’s long-term coal pricing and security.
Sumangal Nevatia
Okay, so sir, Meenakshi would be more of a FY28 volume approach.
Satish Pai
Yeah.
Sumangal Nevatia
Okay. Understood, understood. Sir, second question is on the capex. So we’re looking to spend almost INR40,000 odd crores in India. Can we give some more detail at this stage in terms of what capacities are we looking at in upstream, downstream? How do we phase out these capex and what would be the capital intensity of the smelters?
Satish Pai
Yeah. So the two projects that have already got EC and broken ground are the Aditya Alumina Refinery for 0.85 KT in Odisha and the 50 KT copper recycling plant in Gujarat. So the refinery is about INR7,500 crores to INR8,000 crores. The copper recycling plant is about INR2,700 crores. So these are broken ground. And FY26-’27 you will see most of this capex coming in.
The two projects where we have now filed for environmental clearance is the 180 KT aluminium smelter expansion in Aditya and the 300-odd KT copper smelter in — expansion in Dahej. So these are the two projects.
So what will happen is FY26, FY27, and FY28 is where all these capexes will play out. FY26 capex should be around INR8,000 crores. FY27 it will go higher. ’27-’28 will probably be at the peak.
Sumangal Nevatia
Okay. Okay. And sir, these volumes at least from the smelter would come in FY29, right? Is that?
Satish Pai
Yes. Yes.
Sumangal Nevatia
Okay. So sir, apart from then the refinery, on the aluminium side, we are not expecting any major change in their volume. It’s largely going to be — earnings are largely going to be a factor of commodity prices, right? And little bit of upstream addition — no, sorry, downstream, better volumes.
Satish Pai
Yeah. So downstream is, Sumangal, quite significant because we have added — we are running at 400 KT. So with Silvassa and the Aditya, we will get to 600 KT by sort of June of next year, calendar year ’25. So this is going to be also fairly significant.
The Copper Inner Grooved Tube 25 KT comes in. So there is small, small, quite a lot of downstream coming in across aluminium and copper which should add. But yeah, upstream volumes will remain flat till the smelter expansion comes in.
Sumangal Nevatia
Got it, got it. All right, thank you so much, sir. I have more questions. I’ll join back the queue. Thank you and all the best.
Satish Pai
Yeah, thank you.
Operator
Thank you. Next question is from Tarang Agrawal from Old Bridge. Please go ahead.
Tarang Agrawal
Hi, good evening sir. A couple of questions. The first one, sir, once Meenakshi kicks in, what are the kind of — I mean you get great raw material security but how does it make the cost structure more efficient? I mean what are the cost savings that you’re expected to do? A broad cut would be helpful.
The second is on TCRC. TCRC is down from $0.204 to I think $0.056. And there are various aspects to this business, right, downstream percentage, silver, gold, sulfuric acid, and TCRC. So how should we really capture this reduction in TCRC for your copper business going forward? I mean would that INR2,500 crore number that you’re operating at on an annualized basis, would that be maintained or you see a downside to it? Just wanted to get a sense, how should we look at it.
Satish Pai
So let me just take the second part first. So TCRCs are going down and as you said, we have a varied chain. So our guidance would be that we expect next year the quarterly copper EBITDA to be around INR600. So that’s how we would model it.
I know this year it has been much higher than INR600 crores running consistently INR700 crores, INR800 crores. But next year with our modeling, we would be around INR600 crores a quarter. So that’s the guidance we can give.
You have to remember that our copper tubes, copper rods, all these three premiums are fairly high and the demand is high. And sulfuric acid, like in Q3, our copper results were quite buoyed by sulfuric acid prices. So we are confident that we’ll be able to maintain that around INR600 crores a quarter.
The first part of the question was on, I forgot.
Tarang Agrawal
Meenakshi coal mines.
Satish Pai
Meenakshi. So if you take coal prices to be at today’s level, and remember that these coal prices on the auction can go up and down, Meenakshi coming in would reduce those coal prices from current levels by up to 30%.
Tarang Agrawal
Did you say 30% from the current levels?
Satish Pai
Yes.
Tarang Agrawal
Okay, got it. And sir, last on the copper piece. So if TCRC were to be $0.056 for this quarter, how would the EBITDA have moved from INR775 crores that has been reported for this quarter?
Satish Pai
I have not calculated that. But I can only tell you that in Q4, you may — you will still not see the full impact of that $0.05 because we’ll be operating with the concentrate that’s already in inventory. So this impact of this $0.05 you will see from the first quarter of FY26.
Tarang Agrawal
Okay. Thank you, sir.
Satish Pai
Thank you.
Operator
Thank you. The next question is from Ashish Jain from Macquarie India. Please go ahead.
Ashish Jain
Hi, sir, good evening. My first question is actually on Novelis. On the Novelis call, Dev and Steve had referred to their confidence that they’ll be getting exemption on the import duties in the US. So I actually missed that call. Is it possible to kind of elaborate a bit more on that and how come we are so confident about getting an exemption? What’s the rationale behind that?
Satish Pai
Steve? Steve, Dev? Did we lost them?
Steve Fisher
You hear me, Satish?
Satish Pai
Yeah, yeah, I can hear you, Steve. We can, we can.
Steve Fisher
So first of all, it’s, very early stages that relates to where these tariffs will ultimately settle out, both what the US has done to date and what other countries might do. But the historical precedent that we’ve seen of getting exemptions as we’ve imported to support our project at Bay Minette has been positive. We think we’re doing exactly what the US government wants in domesticating supply chains and building the downstream facility in the US with employment to supply beverage packaging and automotive markets.
As it relates to primary aluminium, which primarily comes in from Canada into the US, the US is short of aluminium and it would take years and years and a lot of investment to bring that supply into the US. And if you go back and look at what happened back in 2018, I think rationally you understand that the flow of metal from Canada to the US is something that ultimately is needed. And we think longer term we’ll see relief associated with that.
We can’t predict in the short term when that relief will occur, but we do believe that on a medium to longer term basis, we’ll see relief associated with the imported primary as well.
Ashish Jain
Got it, got it, Steve. Thanks. But fair to say that, this — there’s a chance that this time it is different given clearly — the approach seems to be more aggressive given the levy is on pretty much any import into US and all. Is that the way to think or we are actually very confident about exemption. I know it’s a very tough question to answer. As in nobody knows the right answer to this.
Steve Fisher
Yeah. Nobody knows the right answer. But I think we have to take a view and I think as we think of a rational view, our view is that the prevailing requirements of primary aluminium coming in from Canada to the US and what we’re doing Bay Minette are the right longer-term solutions for the market. But anything could happen. But that’s our view.
Ashish Jain
Got it. Got it. Sir, coming to India, just on the aluminium and copper project, the upstream projects, where are we in terms of hitting the ground on those [Speech Overlap]
Satish Pai
I just described that. So the alumina refinery and the copper recycling ground broken construction started. The aluminium smelter expansion and the copper smelter, we are in the process. We have filed for environmental clearance.
Ashish Jain
Okay, okay. Got it, Got it. Thank you so much, sir, and best of luck.
Satish Pai
Yeah. Thank you.
Operator
Thank you. Next question is from Indrajit Agarwal from CLSA. Please go ahead.
Indrajit Agarwal
Hi, thank you for the opportunity. I again have a question on Novelis. Fundamentally what happens to scrap prices in case of a tariff and in turn what happens to scrap spread as a result? I mean, we understand this time it could be different, but how does that flow through generally?
Satish Pai
Steve?
Steve Fisher
So again, early on, but as we understand today, scrap would not be subject to the tariffs coming into the US under 232. So therefore the short scrap position in the US would be filled from other markets because it will become very attractive with higher overall local premiums rising, the Midwest premium. But then the other international markets will also come under pressure whether it’d be Europe, Asia or South America that we do business in.
So again a complicated question. But the nearer term would be that there would be a flow of scrap into the US to fill the short position in the US and with the favorable pricing that would be there.
Indrajit Agarwal
And the pricing of scrap, is it generally as a percentage of LME or percentage of LME plus Midwest premium? How does the pricing generally work?
Steve Fisher
Yeah, in the US it trades as a percentage of LME and Midwest premium. So a combination.
Indrajit Agarwal
Sure. Thank you. That’s all from my side.
Steve Fisher
Yeah.
Operator
Thank you. The next question is from Amit Dixit from ICICI Securities. Please go ahead.
Amit Dixit
Yeah. Hi. Good evening, everyone, and thanks for the opportunity sir and congratulations for a great set of numbers. Couple of questions from my side. One is that how did the aluminium cost of production move in this quarter and if you could highlight the prospective sense also that how it is likely to move in Q4. That is the first question.
Satish Pai
Okay. The Q3 to Q2 was flattish. I think Q3 to Q4 will be similar. I mean there are some upward pressures coming in in caustic, furnace oil, CP coke. But we think balancing around coal prices we may see a little bit of softening. So we think Q4 will be more or less flattish, won’t be more than 1% or 2% off from where we are.
Amit Dixit
And in terms of coal sourcing, sir, when both Meenakshi and Chakla come on stream and assuming we are able to extract the full EP up to a full EC limit. So whether you will need linkage and the e-auction coal then due to technical or logistical reasons or we will meet our entire requirement through captive, provided coal prices remain where they are.
Satish Pai
So we will still need to get coal for Dahej which is in Gujarat. That’s about it. Otherwise, we should be self-sufficient.
Amit Dixit
Okay. And 30% you said is including Meenakshi and Chakla. Just to be clear.
Satish Pai
Yes.
Amit Dixit
Okay, great, sir. That’s it from my side. Thank you and all the best.
Satish Pai
Yeah. Thank you.
Operator
Thank you. Next question is from Satyadeep Jain from Ambit Capital. Please go ahead.
Satyadeep Jain
Hi. Thank you. Just both questions on capex. Firstly Mr. Pai on US Novelis, you outlined capex in India for the next two years. We already have guidance for this year If you can maybe talk about how much capex could be there annually for ’26, ’27 in Novelis.
And one of the peers, obviously, the other peer was putting up capacity during this call said they’re putting up EAF in steel and aluminium rolling but they said aluminium rolling, everything is known, there is tiny suppliers. So there is hardly any room for surprises. It’s generally the EFA that thought there are supplies but seem to me — seem to indicate that that is fairly homogeneous supply chain and all. So what has led to the supply for Novelis on that capital cost and delays which the other player is saying, it’s very relatively easy supply — equipment supply chain and all. So just two part on overall capex guidance that we expect for next two year.
Satish Pai
Yes, you’re talking about the Bay Minette Novelis capex. I’ll let Steve answer. Just to let you know the other person is new entrant to the aluminium industry, so quite impressed with their confidence on the aluminium supply chain.
But Steve, go ahead.
Devinder Ahuja
I can take the capex question. Yeah.
Steve Fisher
Yeah, yeah, go ahead Dev. I didn’t catch the full question either. Go ahead.
Devinder Ahuja
Yeah. So to your point about how much capex to expect in ’26 and ’27. So the way to think about it is that over three years, FY25, ’26, ’27, the average capex is $2 billion a year and this year will be more around $1.8 billion, next year will be a little over $2 billion and so you should think about a cumulative capex altogether including Bay Minette of about $6 billion over three years. So that’s the answer to your specific capex question.
Can you just repeat exactly what was the second part of the question, so between Steve and I, we just want to be clearer on that.
Satyadeep Jain
The other player, the new entrant to the industry, it’s putting up two — there are two capex items. One is the aluminium rolling and the other one is and it’s a different kind of EAF where they use different sorting stack. But the delay has actually been then there on something not on the aluminium. So when asked, they said, the equipment supply chain, it comes from China. It’s really standardized. So there is less room for supplies. It’s actually on the EAF, they’re seeing more supplies because it’s a kind of an unproven technology. So that seemed to indicate that the room for supplies on aluminium capex is lower in that supply chain. So just wanted to understand what has Novelis experience different from what they are saying.
Devinder Ahuja
Steve, you want to take that?
Satish Pai
So I guess, I’m not — even I was trying to understand. So when we went from our original guidance of 2.7, 2.8 to 4.1, we had explained that because we had moved sites and our civil costs had gone up substantially compared to what we had estimated in the budget. So that was done I think about one year ago that and we are now at the 4.1 and we are committed to do this project at the time and at the budget that we had put in.
I think commenting on what the other person is saying and the supply chains from China and all, I’m not sure that we have much more to say on that.
Satyadeep Jain
Okay, fair enough. Second question would be on the India capex supply. On the alumina one also I think initially from what we understood was this is going to be a 2 million ton refinery and the capex for 2 million ton was going to be about $1 billion. Was our understanding because there’s already infrastructure, the land is right next Utkal. There is already surplus land which has been acquired over time. So now it’s $1 billion for 850 KT. Is that understanding correct?
And what has led to — was it earlier misunderstanding on our side of estimating $1 billion for 2 million ton refinery in two different stages? And then when you look at three….
Satish Pai
We never said $1 billion for 2 million because it’s me who is making the comments. So I think what is, let me tell you, it’s about INR7,000 odd crores. I round it off to $1 billion. But what we set in place is like Utkal, this will be built for a 3 million ton refinery. So large part of the infrastructure, the conveyance systems, the residue handling areas, everything we will build for a 3 million ton refinery. But we’ll put the first line in place. So that’s why it’s around INR7,000 odd crores.
Satyadeep Jain
Okay. So when you look at three different projects, I think lastly just on execution, it’s a very broad plate with three different large projects in India and obviously Bay Minette is ongoing. How do you try to derisk execution? I mean, I’m just going back in history when there were multiple projects, that risk of execution. So now you’re in a phase where you have multiple projects simultaneously. How do you try to derisk on that front?
Satish Pai
No, that’s a very fair question and I think, if anything I wanted to tell you that in many ways in Hindalco, we are going to cut out all the other distractions. We are not going to look at any other new opportunities. So the whole management team is focused on these four projects.
We have set up a project monitoring team, a project execution team. We have taken external help of some consulting agencies to do that. So we are very focused that these projects we are going to bring in on time and on budget and I think that we will be able to do it because we are extremely focused on it now. There is no other thing in the business we will be looking at besides these projects.
Satyadeep Jain
Okay, thank you, and wish you all the best.
Satish Pai
Yeah.
Operator
Thank you. Next question is from Pathanjali Srinivasan from Sundaram Mutual Fund. Please go ahead.
Pathanjali Srinivasan
Sir, thank you for the opportunity. I just wanted to get a few things clarified. So you mentioned that the total capex would be $6 billion. So could you give me this breakdown? What are the assets that you’re talking about for the $6 billion?
Satish Pai
You’re talking about the Novelis capex breakdown that he gave over three years, right?
Pathanjali Srinivasan
Yes, yes, yes.
Satish Pai
Yeah, Dev?
Devinder Ahuja
Yeah, yeah. So no, that’s not so complicated. So basically if you consider that we have as on date spent about $1.3 billion when it comes to the Bay Minette capex. We still have $2.8 billion to go. Around $2.8 billion to go and that is going to happen a little bit in the fourth quarter but most of it will come in the next two years. So let’s say somewhere in the range of about $1.4 billion is that itself maybe a little less because this quarter we’ll spend some more.
And then $300 million to $350 million is maintenance capex. And then there are other ongoing improvement projects or debottlenecking projects which are in the pipeline for which cash still has to go out. I mean there is Logan de-bottlenecking, there is Oswego for which some cash has to go out, and also some cash has to go out for some of the recycling projects like the Ulsan project which we have just commissioned. But cash kind of trails a little behind them.
So there are other improvement projects, debottlenecking projects, ongoing projects which is forming the rest. So that’s really how the math works.
Pathanjali Srinivasan
Sir, I think you’ve covered all this in your presentation. It adds up to $4.5 billion. So I’m not able to get the math on the remaining $1.5 billion where it’s being spent. And also when you say $6 billion, is it cumulative of the current year spending? Are you saying next two years, and the current year put together is $6 billion or is it for ’26, ’27, ’28?
Devinder Ahuja
No, what I’m saying is that ’25, ’26, ’27, you can take it as cumulative of $6 billion.
Pathanjali Srinivasan
Okay. And the difference between $6 billion and $4.5 billion, can you tell me where that’s getting spent?
Devinder Ahuja
Yeah, so, once again, so we are talking about three years capex of $6 billion. So let me try again. This is ’25, ’26, ’27. We had spent only about $700 million at the end of last year. So again I’m talking starting from fiscal year ’25. Right? So that really means that we had to spend — we have to spend $3.4 billion out of the total $6 billion capex in three years. Right? And so that is really a big part of it, $3.4 billion.
And the rest about $2.6 billion is basically things like maintenance capex which you can take it about $1 billion. Right? And the rest is other ongoing projects, you know, which is debottlenecking expansions which I already listed earlier. So that’s how it all adds up.
Satish Pai
Sir, I think the $4.5 billion, you’re confusing with just the strategic capex. What Dev is telling you is that the strategic capex plus maintenance capex plus others is roughly $6 billion including the current year we are on and FY26 and ’27.
Pathanjali Srinivasan
Got it, sir. Thank you.
Satish Pai
Okay.
Devinder Ahuja
All right.
Operator
Thank you. Next question is from Raashi Chopra from Citigroup. Please go ahead.
Raashi Chopra
Thank you. Could you please repeat the hedge bit again? I missed that earlier on the call.
Satish Pai
So the hedge bit, this current Q4 FY25 we have 35% of the commodity hedged at $2,600 per ton. And we had an ongoing 15% zero collar with a bottom at $2,262 and a ceiling at $2,558. The currency for the quarter is 16% hedged at INR88. And just to round it off, for next year, we have 12% of the commodity hedged at $2,700 per ton and 13% of the currency at INR87.33 per dollar.
Raashi Chopra
Thank you. Then on the — what was the alumina volume that was sold during this quarter?
Satish Pai
Sorry, the..
Raashi Chopra
Alumina volume, alumina sales.
Satish Pai
Oh, the alumina sales. Alumina sales was 165 KT in Q3. Will be about 180 KT to 190 KT in Q4.
Raashi Chopra
On the coal, you said that when both Chakla and Meenakshi start and the coal cost should go down by about 30%. Is that correct?
Satish Pai
From today’s level? Because it’s always important where the baseline you’re considering. Yes.
Raashi Chopra
And both should start like in about two years from now like proper coal mining.
Satish Pai
No, no. Chakla box cut is this year. Meenakshi we just got. So it will take us two more years to get all the clearances and start.
Raashi Chopra
When you say this year, you mean calendar ’25 or like now?
Satish Pai
Calendar year ’25, FY26. So we should be say October, November, we are planning for the opening of the mine. So coal will start from let’s say February, March of calendar year ’26.
Raashi Chopra
This makes you pretty self — once both these mines are ramped up fully then you’re full — you’re pretty self-sufficient. Right? I mean theoretically.
Satish Pai
That’s the plan.
Raashi Chopra
Okay. And this last thing on the capex, India capex you mentioned the INR8,000 crores for next year. This year what would be the number and what is done in nine months for India?
Satish Pai
It’s about INR6,000 crores. I think in nine months, we had spent INR4,400 crores.
Raashi Chopra
Okay. And the India current cash balance you said was, INR1944 crores, right?
Satish Pai
Sorry?
Raashi Chopra
India cash.
Satish Pai
Net cash, yes. Because we have about INR14,000 crores in treasury and INR12,000 crores gross debt.
Raashi Chopra
Got it. Okay. Thank you.
Satish Pai
Thank you.
Operator
Thank you. Next question is from Parthiv Jhonsa from Anand Rathi. Please go ahead.
Parthiv Jhonsa
Thank you, sir, for the opportunity. Sir my first question pertains to the downstream aluminium business. It has been quite flattish QoQ. By when do we expect this number to start giving the over 200 or 210 kind of a dollar EBITDA number? Any flavor on that sir?
Satish Pai
Yeah, I think in Q4 we should be getting close to that number. And next year, I’m really bullish on the whole thing because the FRP2A project will also commission. Silvassa will be ramping up quite well. So the 200 number we should be getting close to it in Q4 and next year we should be well into the numbers.
Parthiv Jhonsa
Okay. Sir, and my second question pertains to alumina. It has come off quite a bit from the recent highs. Just wanted to understand your take on it. How do you expect it to go going forward?
Satish Pai
Yeah, I mean the 700 was due to a sort of force majeure type of situation that happened with the Guinea bauxite. I think currently the indexes are around 500. So I don’t know, it’s going to be in that 400 to 500 range. You have to remember the sort of more traditional pricing is more like between 350 and 400. So we’ll have to see if the tightness still remains. But currently, it’s at around 500.
Parthiv Jhonsa
All right. Thank you. Thank you so much.
Satish Pai
Yeah, thank you.
Operator
Thank you. Next question is from Prateek Singh from DAM Capital. Please go ahead.
Prateek Singh
Hi, thanks. So, Mr. Pai, just a question on alumina itself. So did we see a flat kind of a pricing this quarter on a QoQ basis for sales? Because the EBITDA improvement that we are seeing adjusted for the provision of INR197 crores for aluminium business kind of seemed like lateralized moment of the change in selling price of aluminium around $200 odd.
So what I expected that because we are selling alumina and alumina prices were significantly higher in this quarter, the impact of it would have come a bit more. So for us, was the transfer pricing or resiliency of alumina was flat on a QoQ basis?
Satish Pai
No, I think the transfer prices in Q3 were higher in a transfer pricing basis. The consolidated or the integrated cost, internally we take out any advantage of the thing but the transfer pricing will follow the market pricing.
The — I think the other one point that has not come up, but I think it was there in our disclosures and I just want to highlight that for the aluminium upstream business, we took INR197 crores of provision related to electricity duty in Mahan on the auxiliary. So this was something that came to us this quarter and we had to take a provision. So the INR197 crores is sitting in the aluminium upstream EBITDA line which you will have to take into account and it gives you probably a better picture.
The other second thing is the RPO obligations have also gone up. So in Hindalco, we take a full provision for the RPO every quarter on the metal prices. So these are the two things that are there in the aluminium upstream EBITDA.
Prateek Singh
Understood. And the second question is lastly on Novelis. So hypothetically, my understanding is that even if the exemptions are not there, the tariffs are largely neutral for us. Right? Because the Midwest premium would remain high in that case. Is that the right understanding that even if there are no exemptions, tariffs are a neutral for us apart from near-term distractions or noise around it
Satish Pai
Steve?
Devinder Ahuja
Yeah, so when you say that even if the exemptions are not there, there will be some compensation from the higher Midwest. Yes, we like to believe that. With the higher Midwest, it does help us widen the spread. So that is directionally the right thinking.
We simply do not see a scenario where either between the countries, Canada, US, Mexico, Korea, we simply do not see a scenario that there will not be a settlement soon around reciprocal tariffs. Because if you’re following what’s the latest discussion that is happening, it is about reciprocal tariffs.
So the door has been opened, wide open between the countries to discuss reciprocity and we feel like this is a signal that there will be a solution in the coming weeks. So we do not see a scenario where this is not going to get resolved through some discussions and negotiations. But if you still want to believe that there will be no exemptions, we do see that the higher premiums will basically help to offset a very large part of the damage from not getting any refunds.
Prateek Singh
Thanks, Dev. Just to follow up on this. So if you can just remind me what happened last time. So was — Novelis and few other players were specifically exempted or it was a part of the entire exemption for Canada which happened like a year later that Canada entirely was exempted and not — and so everybody benefited and not just us.
So is it like this time we are applying for the exemption. So specifically it would be for us or it would be a country-wide exemption for Canada, where we’ll also be benefiting.
Devinder Ahuja
Well, so between the US and Canada, there was a settlement and duties were kind of exempted for movement of products between Canada and the US entirely as part of the broader MCA settlement. And when it comes to imports from some of our inter-regional side like Korea, it goes through an exemption process.
Whether everybody benefited from that is difficult for me to say. But basically between US and Canada, it was a broad exemption. And so when it comes to countries like Korea, it was basically a specific exemption — continues to be a specific exemption on application. So that’s the way it moves.
Prateek Singh
Understood. Thanks a lot for this. Thanks.
Devinder Ahuja
You’re welcome.
Operator
Thank you. Next question is from Amit Murarka from Axis Capital. Please go ahead.
Amit Murarka
Yeah, hi, good evening. Just I wanted to check what is the hedging gain in nine months of FY25 for you and was there some hedging in booked in Q3 as well?
Satish Pai
Q3 was sort of, I think it was a wash. It was about INR36 crores negative. I think for the year, we are about INR700 crores positive because of hedging.
Amit Murarka
Okay. And also the alumina external sales volume. So you have 1 million ton of excess is what I understand. Maybe more than that actually. So why is that the run rate is still 150 to 200 quarterly? Like should we….
Satish Pai
We don’t have 1 million excess, we have about 700 excess that we sell.
Amit Murarka
You would have 3.7 million ton, 3.8 million ton of alumina capacity, right?
Satish Pai
We do have annual maintenance shutdowns in all the refineries as well. So the total amount we can produce and what we sell roughly it’s around 700 KT.
Amit Murarka
Sure. So this is optimal run rate what you are at then?
Satish Pai
Yeah, I think that we are putting in a spare boiler in Utkal. So when that comes in, then we will get more closer to the 850 that we will be able to sell.
Amit Murarka
And the million ton alumina project will commission by when?
Satish Pai
Sorry?
Amit Murarka
The first leg of the alumina expansion that should get commissioned by when?
Satish Pai
It is somewhere in December of ’27. So on the hedging I’ve just been corrected. The INR700 crore gain was last year. This year in the first nine months the gain has been INR90 crores. So really because of the high alumina prices, I think we are more or less running at a wash right now. Aluminium prices, sorry.
Operator
Thank you. Next question is from Somaiah from Avendus Spark. Please go ahead.
Somaiah Valliyappan
Thanks for the opportunity, sir. I have few questions on Novelis. So first one, in terms of Novelis margin, we had alluded three reasons which will help us to kind of revert back to somewhere close to Q2 levels. So one was on contract pricing, the other one was on higher recycling and then operating leverage. If you can get a broad sense of which of these is the largest in terms of drivers, which will help us get back there?
Devinder Ahuja
I missed some words but were you asking about the Q3 versus Q4? Was that your question?
Satish Pai
No, no, he was asking that between scrap operational efficiencies and where the margins are down, which is the biggest impact.
Steve Fisher
I think it’s scrap, right, Dev?
Devinder Ahuja
Scrap. Yes. I mean it is really scrap, which is the most leading cause. So we can attribute it entirely to scrap.
Somaiah Valliyappan
Sorry sir, My question was on our expectations for Q4, where we expect margins to kind of revise. So for which we had alluded three reasons. One is that [Technical Issues] which [Technical Issues] and also mentioned about higher recycling and then we had said [Technical Issues] so operating leverage. Understand which of the — because we were around close to 400 and then 475, 480 Q2 levels. Just trying to understand which would help us larger in terms of quantum getting back there.
Devinder Ahuja
Yeah. So clearly, we get a big boost from operating leverage because the volumes for Q4 are going to be meaningfully higher. As we keep saying that you can expect Q4 volumes to be more around the lines of Q2. So we had 904 KT in Q3 and that will be one.
Second, after that pricing is going to provide us a meaningful upside and the rest will come from let’s say, more scrap consumption and other factors. So that is really how I would say it. So I would say that volume, operating leverage, therefore, and pricing are the two big factors in Q4 versus Q3.
Somaiah Valliyappan
Got it. So this is because we are able to pass on some higher cost because earlier we used to have this cost indexation and [Technical Issues] so here we were able to pass it on. Is it a cost-led take back from customers or is it the market environment allows us to take a higher pricing at this point in time?
Devinder Ahuja
We have new contracts. We have new contracts, higher priced contracts which are taking effect from January 1 and that is what is helping us. So I’m not talking about the inflation indexation here, I’m talking about the repriced contracts in particular.
Somaiah Valliyappan
So these are existing contracts that have come up for renewal or these are completely fresh contracts where we are able to have a higher price.
Devinder Ahuja
Well, these are the contracts that we have entered into. We have been saying that beverage can contracts will continue to give us a higher pricing. So these are contracts which have become effective and these are long term contracts on a higher pricing. So you can call it contracts which are renewed but at a meaningfully higher priced.
Somaiah Valliyappan
Understood, sir. So the reason why I’m asking [Technical Issues] contracts are typically three to five years, which means maybe 20%, 30% of the contracts come up for renewal in a year. So which means a similar exercise, something that’s possible next year when we again come for a renewal. That’s the reason I want to understand.
Devinder Ahuja
Yeah. So again, what we have been saying is that the contracts that we have entered into now are much longer tenured contracts generally. So yes, I mean, generally I can only say the same thing that our contracts are now coming at higher prices in beverage packaging and some contracts will come every year for renewal, but a big bulk of the contracts have really been renewed at higher prices right until the end of the decade.
So overall the key message here is that can has been repriced, will continue to get repriced, and that benefit will be seen or has been seen, but will be seen starting again from Q4 as new contracts come in.
Somaiah Valliyappan
Understood, sir. Sir, also on the scrap outlook, so just keeping the tariff aside. So in general we have seen now two, three months of this change in regulation in terms of imports for China. So how are we seeing next six months or one year? Have we seen the max impact of scrap’s prices going up or the demand for scrap will only continue to go up and the prices will only continue to go higher?
I’m keeping the tariff aside. So in general, what is — I mean, is more supply into the market going to be more secondary than primary and that is going to structurally keep the market higher? Just your thoughts on that.
Satish Pai
Steve, you want to take that.
Steve Fisher
Yeah, sure. So I mean in the short and medium term, it is hard to predict. As we said on our call earlier in the week, we do think that the overall scrap pricing in the market is starting to peak out. Now how much it moderates back in the short term, medium term, is hard for us to predict. We do think that we will be at new levels, higher levels of scrap pricing on a longer-term basis.
What will moderate that back down is new technology, efficiency, and collection of scrap, till the scraps being used in processes, higher recycling rates, and so forth. But that will take time to ultimately see the overall impact into the marketplace.
What we at Novelis are doing to protect our margins is to address this headwind that we see as more structural through looking at cost efficiencies, operating efficiencies, portfolio optimization, procurement savings. And we have a number of initiatives that we’ve launched and are in process.
We’re not in a place to talk specifically about the total impact of all those projects and the timing, but in the early April timeframe, we’ll be able to lay out in a bit more detail what some of those are so that you can better understand how we progress back towards our longer-term — EBITDA per ton of $600 per ton over the next several years.
Operator
Thank you. Next question is from Ashish Kejriwal from Nuvama Institutional Equities. Please go ahead.
Ashish Kejriwal
Yeah, hi, good evening, everyone. Is it possible to share the revenue of alumina which we sold outside?
Satish Pai
Sorry?
Ashish Kejriwal
Is it possible to share the revenue of alumina which we sold? We have given some — we have given the volume but we haven’t shared the revenue. Is it possible to share that?
Satish Pai
No, we don’t give out that. So we can only give you the volume. Sorry about it.
Ashish Kejriwal
No issues. So to put it different way, is it possible to share how much alumina price changes for you in this quarter versus last quarter? I don’t want the absolute number, but even if the change, if you can do it because we sell on a spot as well as on a contract basis. So just wondering what kind of change we have seen in alumina prices for third quarter versus second quarter.
Satish Pai
You’re talking about Q3. Q2 to Q3, what was the alumina price movement? Is it?
Ashish Kejriwal
Yes, yes, for us.
Satish Pai
Q2 to Q3, I think that that was — it follows the index. We — I think the index was around 375 in Q2 and the index has been around 700 in Q3. So that broadly should tell you the pricing. And as I was saying, currently in January, February, it’s running at 500.
Ashish Kejriwal
Sir, understood. But, I think we — do we think that — do we sell everything on spot basis or there’s a contract basis also?
Satish Pai
No, no, our — quite a lot of it is on contract basis and some parts of it have even got linkage to LME. So you are absolutely right. Unlike Nalco or something, we do not have the full advantage of the index.
Ashish Kejriwal
So that’s what, sir, I was asking, you know, if it is possible to share the delta which we have witnessed in our average alumina price.
Satish Pai
No, we don’t give. We rather not give that.
Ashish Kejriwal
No, no issue, sir. Sir, second question is our alumina refinery that’s coming on December 2027 and we have already signed with OMC. So this is for 1.5 million ton bauxite. How much volume? Is it 2 million ton or the entire 6 million ton we have signed MoU with them?
Satish Pai
We have signed for 3 million tons of bauxite. That’s enough for 1 million tons of alumina.
Ashish Kejriwal
Okay. And any pricing also we have signed or this will be decided on a something different bais.
Satish Pai
There is a formula for the pricing, So there is a formula for the pricing. I’ll get Subir maybe offline to explain that to you.
Ashish Kejriwal
Sure, sure. And thirdly, in terms of Novelis, when Dev and Steve was talking about scrap prices, is it fair to assume that the high scrap prices have already hit or will hit in our P&L in fourth quarter and thereafter maybe that will be the — assuming that import for the scrap price does not move, that will not change on an increasing trend from first quarter onwards?
Satish Pai
I think that is what Steve just answered in the previous question. I mean, it’s difficult to say, but he thinks it has peaked the scrap market prices.
Ashish Kejriwal
So the pricing is different. Sourcing is also getting difficult or we are able to source it at a higher price also.
Satish Pai
Steve, you want to take that?
Steve Fisher
Yeah, yeah. So yeah, so we’re not worried about sourcing from a volume standpoint. We’re getting what we need in the marketplace. It is just more about the pricing itself.
As Dev said, one of the drivers in the fourth quarter is our ability to process more scrap metal through the system in our fourth quarter, which still even at the pricing that we see today is an advantage from an overall operating cost efficiency standpoint.
Ashish Kejriwal
Understood. And sir lastly on this only when we are seeing that normally we do recycling 61% of the volume, any — and we have commissioned few recycling plants also. So any guidance which we can give for FY26 that how much we will produce through the recycling route?
Steve Fisher
Yeah. So as you know, we’re commissioning our auto recycling facility at Guthrie, Kentucky. That’s underway and progressing. So that will increase the overall volumes throughout 2026 as we get to full capacity of 240 KT.
And then the other one that we’re commissioning is our 100% owned UAL recycling facility that started in the month of January and again will progress over the following several quarters. So there is good momentum in both operating efficiency at our current facilities and new capacity coming online to absorb more scrap volume.
Operator
Thank you very much. Due to the paucity of time, we’ll have to take that as the last question. Participants may connect with the Investor Relations team for further questions. I would now like to hand the conference back to Mr. Satish Pai for closing comments.
Satish Pai
Yeah. Thank you, everyone, for your attention. I guess this quarter sort of shows the benefit of our integrated business model between upstream and downstream because, as you see the downstream has a little bit of headwind, the upstream had the tailwind. So the consolidated results come out quite well.
So with that, I thank you for your attention.
Operator
[Operator Closing Remarks]