The closure of Vedanta’s Sterlite Copper plant at Tuticorin in Tamil Nadu has cast a shadow on copper production in India.
The closure of Vedanta’s Sterlite Copper plant at Tuticorin in Tamil Nadu has cast a shadow on copper production in India. The domestic refined copper output has fallen 54.8% during the first half of the current financial year (H1-FY19), which is majorly attributable to the prolonging shutdown of the 4,00,000-tonne Tuticorin smelter which accounted for 40% of the country’s copper smelting capacity.
The Sterlite Copper plant, which was mired in controversy due to alleged environmental violations, was forced to shut down in the last week of May and since then the production got stopped. With the uncertainty looming over its reopening at the earliest (as the case being heard at the National Green Tribunal), the fall in output may increase 60% by the end of this fiscal and the imports may go up further.
According to CARE Ratings analysis, during the first half of the year, Hindustan Copper (HCL) and Hindalco output was also restrained due to the shutdown of their smelters for maintenance. This, too, has added to the dip in production of the metal. The drop in domestic production during H1-FY19 has led to the domino effect of a sharp increase in the country’s imports and fall in the exports thus turning India into a net importer (which imports more than it exports) of refined copper (India used to be the net exporter of refined copper).
Exports have fallen 93.6%, (during H1-FY18, exports had increased 35.8%) whereas imports have increased 167.9% (during H1-FY18, imports had fallen by 24.2%). India imported refined copper from Japan (73%), Congo (9%), Singapore (8%), Switzerland (2%), Tanzania (2%), South Africa (2%), Chile (2%) and UAE (1%), and exported the metal to China (73%), South Korea (18%), Bangladesh (5%) and Malaysia (3%) during H1-FY19.
Share of exports to China has increased to 73% during H1-FY19 from 57% during H1-FY18 and the share of imports from Japan to 73% during H1-FY19, against 58% in the corresponding period of the previous year, CARE Ratings analysis pointed out. Domestic consumption has risen 5.1% on account of increased use of copper in the construction, electrical and automobile industry. Demand for the metal in the domestic market is largely dependent on the electrical (34%), building & construction (8%), automobiles (11%) and the consumer durables segments (8%).
With the closure of the Sterlite’s Tuticorin smelter, it was predicted that the production of domestic copper would fall 40% to 510,000 tonne, against the output achieved during FY18 (843,000 tonne). Given the decline in refined copper production has been more than anticipated due to the planned shutdowns of smelters of HCL and Hindalco, it has been further revised to 331,000 tonne by FY19-end. Hence, the production of the metal would fall 60.7%. So far (H1-FY19), domestic copper production has been 157,000 tonne.
It is expected that the production from the other two players to pick up during the third quarter (Q3) and Q4 due to the remission of copper smelters. Demand for copper in the domestic market is dependent largely on the electrical (34%), building & construction (8%), automobiles (11%) and the consumer durables segments (8%). It is estimated that the domestic demand will be in the range of 530,000-535,000 tonne in FY19.
Global copper prices would hover around $6,200-$6,300 per tonne during the short- to medium-term period on a monthly basis. LME copper prices are to remain volatile till there is some settlement between the trade/tariff wars, prevalent in the global economy, CARE Ratings analysis said.