– By Dr Shishir Choudhary
As the world transitions to a cleaner, greener and more sustainable future with more renewable energy sources replacing fossil fuels, the demand for copper is all set to multiply exponentially. A greener energy ecosystem means more wind turbines, solar modules and panels, electric vehicles, and new-age batteries like lithium-ion etc, and more clean energy metals to build these new technologies. Thus, the world is expected to witness a manifold rise in copper demand in the coming years.
This critical element also plays a significant role in downstream industries such as manufacturing, construction, and transportation and is a key component in electrical wiring, plumbing pipes, and construction industries. A study by the International Copper Association reveals that copper smelters in the United States, Japan, Germany, the United Kingdom, and France contributed a total of $24.5 billion to the economies of those countries in 2023. The contribution to the global economy was $270 billion and $253 billion to the Chinese economy.
Copper smelters in India satisfy the country’s need for a stable refined copper supply because they convert copper concentrate—having copper content ranging between 26 per cent and 32 per cent–into refined copper cathodes, which have more than 99 per cent copper purity and produce byproducts, which are beneficial to downstream industries and agriculture.
Unfortunately, India’s copper production has not been able to keep pace with the rising demand, with the country forced to import 1,81,000 tonnes of copper, while exports were a meagre 30,000 tonnes. This demand-supply gap is likely to widen further in the future as the country implements its highly ambitious climate change targets of achieving net-zero emissions by 2070, 50 per cent renewable energy installations by 2030 etc.
The logic of increased demand is further corroborated by various studies. The size of the copper market in Gujarat, one of the country’s most industrialised state, which is currently at 337 kilotons per annum is likely to touch 377 kilotons/ per annum in 2025, says a recent study, The reason: Many companies like Polycab India Limited, KEI Sanand, Precision Wires, Greatwhite Global Private Limited etc are all on an expansion spree and need more copper.
No wonder, Kutch Copper Ltd (KCL), a subsidiary of the group’s flagship Adani Enterprises Ltd (AEL), is setting up a greenfield copper refinery project to produce refined copper with 1 million tonnes per annum in two phases. The factory at Gujarat’s Mundra is being built at a cost of Rs 8,783 crore with an annual production capacity of 1 million tonnes (MT) in two phases. The first phase is expected to be completed by March 2024 and the entire debt of the project has already been tied up with a consortium of banks led by the State Bank of India.
The Kutch Copper Limited project could prove to be a game-changer for the copper industry, helping to reduce the rising demand for the metal and therefore the dependence on imports. It will not only produce copper cathode and copper rod but will also generate valuable by-products, including gold, silver, nickel, and selenium and sulfuric acid, which is a critical input for various industries such as fertilizers, detergents, pharmaceuticals, paper production, sugar bleaching, water treatment, and more.
The situation in Tamil Nadu, however, is completely different. The closure of the Sterlite Copper’s smelting facility at Tuticorin in Tamil Nadu because of demonstrations in May 2018, resulted in the country and state facing many challenges. It faced an annual net foreign exchange outflow of $1.2 billion due to copper imports, with copper imports rising by 26 per cent in the first quarter of FY22, to 60,766 tonnes, from 48,105 tonnes during the same time in FY 21. The shutdown has also hurt the Tamil Nadu economy with thousands of job losses and closure of many downstream industries, including revenue losses of Rs 2,559 crore in taxes to the government.
China, on the other hand, already one of the world’s largest consumers of copper, is busy ramping up its production capacity not only to meet its domestic needs but also to export to the world. For instance, Nanfang Nonferrous, China’s largest private copper producer, is set to double its copper smelting capacity to a staggering 700,000 metric tons per year by October 2023.
Similarly, Tongling Nonferrous Co., hopes to complete three projects by 2025-end, including setting up a 500,000 tonnes per year (tpy) copper facility in Anhui, to make it the world’s biggest copper smelter. A survey conducted by Fastmarkets revealed that from 2023 to 2026, twelve expansion or construction projects are scheduled for completion, signifying a net increase of at least 3.4 million tonnes per year of new copper smelting capacity. These moves only exemplify China’s effort to dominate the refined copper production market to cater to a changing world, which is more dependent on copper than ever before.
While China’s copper production expansion plan is already in place, India needs to substantially increase its copper production to become Atmanirbhar in this critical metal. While the country’s total production in 2022-23 was 5.5 lakh tonnes from a total capacity of 7.85 lakh tonnes, the demand or consumption of refined copper per annum is around 6.6 lakh tonnes, which is only three per cent of the global market, according to a Ministry of Mines report of July 12, 2023.
In the long run, India can learn from China for policy insights as they were in similar positions to India not too long ago. However, China secured its raw material supply of copper by taking a majority stake in 24 copper mines in mine-producing countries. For India, it is essential to expand the ambit of Khanij Bidesh India Ltd (KABIL), the joint venture company created by the Ministry for international mine acquisition, to include copper. A stable raw material supply will be a vital first step in making India Atmanirbhar in copper.
(Dr Shishir Choudhary is an economist. He is the retired HoD, Economics Department, St. Xavier’s College, Ranchi.)
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