New Delhi: India, a major exporter of refined copper till a few years ago, is set to become a net importer for the third consecutive year as a plant in Tamil Nadu’s Thoothukudi continues to remain shut due to environmental concerns.
The sharp fall in India’s exports has proven to be advantageous for neighbouring Pakistan, which has stepped in to partially bridge the gap, especially to countries like China, according to trade data and exporters.
India turning a net importer has been both on account of a sharp increase in imports and a contraction in exports. This is mainly due to shutting of a plant of Vedanta’s subsidiary Sterlite Copper, which had a production capacity of 4 lakh tonnes.
Sterlite Copper’s copper smelter plant in Thoothukudi was shut down in May 2018 by the Tamil Nadu government after the state’s pollution control board made a recommendation to this effect. This followed violent protests by residents after environmental concerns that the plant posed a health hazard to those living in the area.
“Domestic copper industry is operating at almost half of its capacity since the last two financial years due to closure of Vedanta Ltd’s 400 thousand tonnes copper smelter at Tuticorin,” said Care Ratings in an 18 February report. It added that India will continue to be a net importer of copper in FY21, pending the resumption of Vedanta’s copper smelting facility.
According to data available with the government, the import of refined copper increased to 92,290 tonnes in 2018-19, from 44,245 tonnes in 2017-18 while exports declined to 47,917 tonnes in 2018-19 from 3.78 lakh tonnes in 2017-18. This resulted in net import of 44,373 tonnes in 2018-19 from net exports of 3,34,310 tonnes in 2017-18.
In terms of value, India’s net exports of refined copper were more than $2 billion in 2017-18 before turning into a net importer beginning 2018-19.
The value of copper
Copper is a major input in many industries. The electrical and telecommunication industry had the largest share in copper consumption followed by transport, consumer durables, building and construction and engineering goods.
After three consecutive months of sharp contraction, India’s copper imports have started rising again beginning September on account of an increase in demand from local manufacturing units which have opened up after the pandemic induced lockdown.
Like with steel products, India’s copper exports, especially to China, also rose sharply in the first few months of the current fiscal due to a non-existent local demand as industries remained shut in India due to the pandemic.
However, with the domestic industry restarting, exports have slowed down.
A shortage in world refined copper stocks coupled with a strong demand from China has also seen global prices increasing. This has raised costs for local industries, which are dependent on copper for their production, leading to demands from some local industry bodies for reopening of the Sterlite plant.
Higher demand and supply crunch also led to a sharp fall in inventory levels which lent further support to prices, Care Ratings said in its note, adding that the ongoing problem of copper ore mining and a strong demand, particularly from China, is expected to keep copper prices elevated over the next quarter.
“We expect refined copper prices to average $6,500-6,800 per tonne in FY21 vs $5,923 in FY20,” it said.
Edge to Pakistan
China was a major market for India’s refined copper exports a few years ago. However, with India ceding this space, Pakistan has stepped in to fill in this gap, albeit marginally.
Trade data from the respective countries shows that India’s share in China’s copper imports fell to less than 1 per cent in 2019 from more than 5 per cent in 2017. Pakistan’s share in China’s copper import basket increased to 0.6 per cent from 0.1 per cent during the same period.
Ajay Sahai, director general, Federation of Indian Exports Organisations, said India had a geographical advantage vis-a-vis exports to China but this has now transferred to Pakistan.
“India was a major supplier of copper till a few years back. We were catering mainly to China. But then the Sterlite plant shut down and we lost most of that market,” he said.
“Pakistan is also producing copper and shares India’s geographical advantage, especially when it comes to exporting to China. Latin American countries also export copper. But in their case, freight costs are higher,” Sahai added.
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