New Delhi: India’s copper imports have risen sharply in the last year-and-a-half. So sharply that a country which in 2017-18, was among the top five exporters of copper cathodes became a net importer beginning 2018-19, according to commerce ministry data.
What changed? Vedanta subsidiary Sterlite Copper’s plant in Thoothukudi (earlier known as Tuticorin) was shut down in May 2018 on the orders of the Tamil Nadu government, after violent protests by residents, who alleged that the factory was a health hazard.
Copper is behind only aluminium and steel in terms of its widespread usage — many industries like construction, telecommunications, transportation, consumer durables and automobiles use the material. And the reduction in domestic capacity has forced many Indian manufacturers to look at imports to meet their demands.
Net importer after 18 years
The before-and-after figures tell a story — in 2017-18, India exported nearly 378 kilo tonnes of copper cathodes — obtained after copper ore is smelted and refined. But after the closure of the Thoothukudi plant, which had a refining capacity of 400 kilo tonnes, India’s exports plunged to 48 kilo tonnes ($300 million) in 2018-19.
In the first half of the 2019-20 financial year, India has exported only 7 kilo tonnes of copper, worth $42 million.
On the other hand, India had imported just 36 kilo tonnes of copper cathodes in 2017-18, worth $243 million.
The figure went up to 84 kilo tonnes worth $551 million in 2018-19, while in the first half of 2019-20, the country has already imported 70 kilo tonnes of copper cathodes, amounting to $447 million.
India had exported nearly $1.5 billion of copper cathodes to China in 2017-18, but the figure fell to $226 million in 2018-19, an 85 per cent drop. In the first half of this year, India has only exported $39 million worth of copper cathodes to China.
On the import front, India has mostly bought copper cathodes from Japan — worth $390 million in 2018-19 and $384 million already in April-September 2019.
Ratings agency CARE said in a September 2019 report: “Production fell by 46.1 per cent during FY19 due to the permanent closure of Sterlite’s 400KT copper factory in Thoothukudi (formerly known as Tuticorin) on 28 May 2018. The Tuticorin smelter accounts for 40 per cent of the country’s copper smelting capacity.
“India used to be a net exporter of copper cathodes till FY18. Now with the closure of the Tuticorin smelter, the drop in domestic production has led to the domino effect of increasing the country’s imports and decreasing its exports. India has become a net importer of refined copper after 18 years.”
Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations, also said the closure of the Sterlite factory in Tamil Nadu was the main reason why copper cathodes exports have fallen.
“India was among the top five exporters of copper cathodes until two years back,” he said.
Current status of the plant
Vedanta has appealed against the Tamil Nadu government’s decision and the matter is pending in court.
In its presentation after the declaration of the second quarter results, Vedanta Ltd said the operations are under “force majeure”, and that the firm has not utilised $519 million of the $717 million capex allocated for the project.
In an interview in June, Vedanta chairman Anil Agarwal estimated that the firm had lost about $200 million in profits on account of the plant shutdown.
Analysts predict that India will continue to remain a net importer of copper cathodes, given that the steadily increasing domestic demand will not be met by the local production capacity.
CARE Ratings estimates that the domestic refined copper demand will increase by 7-8 per cent by the end of the current fiscal, led by the growing demand from the power sector, renewable energy, consumer durables and hybrid and electric cars.
“Due to the increase in demand, India will continue being a net importer of refined copper during FY20 as well, unless the Madurai court passes the judgement for the remission of the Tuticorin smelter,” it said.