There is urgent need to step up the domestic production of copper, to capitalise on projected growth in global demand, says N.S. Venkataraman. As the global demand for copper is on the rise in view of net-zero emission targets, copper prices have increased to $10,000 in 2022 from the average $6,023 in 2018, which points to the importance of copper production in India, he points out
Demand for copper has been steadily increasing in India over the years, and the trend is likely to continue. While India was a net exporter of copper a few years back, it has become a net importer now, due to the forced closure of the Sterlite Copper unit in Tamil Nadu. However, the Adani Group has announced the commissioning of a copper smelter project in Gujarat, which will enable India to establish its place in the global market.
India’s copper demand witnessed a 16 per cent growth in FY 23. And in FY 2024, the trend indicates a double-digit growth, outstripping global growth, which is estimated at around 3 per cent per annum. Sectors like infrastructure and EVs are among the key sectors driving consumption of copper in India, apart from consumer durables. The Indian Government’s focus on infrastructure development and transitioning to clean energy and the growth in consumer spending are expected to remain key growth drivers.
During the few months prior to November 2023, copper cathode demand reached 598,000 tonnes or 81.2 per cent of the total demand recorded the previous financial year. Cathode imports surged by 174 per cent year-on-year during the period. Imports of copper scrap and wire rods saw significant increases of 56 per cent and 13 per cent, respectively. These trends indicate that India’s copper demand will record an impressive growth in the coming years. There is thus urgent need to increase domestic production of copper.
Domestic copper production has not been able to keep pace with the rising demand. More than 50 per cent of India’s smelting capacity has remained shut down since 2018. The closure of the Sterlite copper smelter in Tuticorin significantly contributed to the severe shortfall in the domestic production of copper. The Sterlite copper unit was shut down due to a counter-productive and what appears to be a motivated protest against the project.
The production there had amounted to 1200 tonnes a day. Fifty per cent of the produce was used domestically. The closure of the plant placed thousands of employees in dire straits. Equipment is degenerating due to standing idle for several months. If the unit is reopened, massive investment will be needed to overhaul the equipment. Though Sterlite Copper has consistently claimed that it had not violated any environmental norms and several studies have confirmed this, the company became a victim of the political scenario in Tamil Nadu, and the Supreme Court has rung down the final curtain on it.
Meanwhile, the $1.2 billion Adani smelter facility in Mundra, Gujarat, is expected to begin producing 5 lakh tonnes of copper this year. The company has contracted to buy 1.6 million tonnes of copper concentrate a year for the project.The capacity of the project is expected to be expanded to 1 million tonnes by March 2029 to cater to the doubling of Indian copper demand projected by the end of the decade.
Copper supply is under stress globally, particularly due to political developments in Peru, where the Las Bambas mine halted production of copper on February 1st last year. China’s industrial growth is estimated to be 5 per cent in 2023 and this could result in greater demand for copper.
The combination of a faster-than-expected recovery in Chinese demand and a fall in Latin American supply amidst low inventories could drive copper prices higher in the global market. As the global demand for copper is on the rise in view of net-zero emission targets, copper prices have increased to $10,000 in 2022 from the average $6,023 in 2018, which points to the importance of copper production in India.
Birla Copper in Gujarat and Hindustan copper in Rajasthan are the currently functional copper projects in India. The Adani Group’s upcoming project is timely, and much-needed. Tamil Nadu’s loss is Gujarat’s gain in this respect.
(The writer is managing trustee, Nandini Voice for the Deprived. He is a chemical engineer and lives in Chennai.)
from Webdoux