← Business Models: Industry Specific (Industrials & Materials) (all topics)
Backward integration - captive power (ferro alloys)
What it is
Ferro alloy smelting is among the most power-intensive industrial processes, with electricity typically the largest or second-largest cost. Captive generation - thermal, hydro or renewable - replaces grid tariffs with generation cost
It is the standard structure for Indian ferro alloy producers and a primary determinant of competitiveness
Impact on industries
- The single largest cost differentiator in the industry - a captive-powered smelter and a grid-supplied one have structurally different margins at the same alloy price
- Insulates against tariff revisions and cross-subsidy surcharges that state discoms impose on industrial consumers
- Allows production to continue economically through price troughs that force grid-dependent smelters to idle furnaces
- Captive thermal carries coal and carbon exposure that CBAM penalises, and heavy upfront capital locks in a fuel choice for decades