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Copper Buying by India to Quadruple on Vedanta Plant Closure

Copper imports by India are about to rise fourfold as the shuttering of a huge smelter in the south of the country slashes local supply at a time when demand is starting to accelerate, according to Care Ratings Ltd.

Overseas purchases of refined metal are set to climb to 170,000 metric tons in the year through March from about 40,000 tons in the prior 12 months, said Urvisha Jagasheth, a Mumbai-based analyst at the credit ratings agency that counts Franklin Resources Inc. and Goldman Sachs Group Inc. among investors.

Asia’s third-biggest economy is facing shortages after a state government ordered a 400,000-ton smelter owned by billionaire Anil Agarwal’s Vedanta Ltd. to be closed permanently in the wake of deadly protests over alleged pollution. Even if top producer Hindalco Industries Ltd. boosts its run rate, it won’t help much because a third of its output is committed for export, Jagasheth said.

“Everybody’s concerned about the situation,” said Dhawal Shah, vice president of the Material Recycling Association of India, a body that tracks the country’s scrap market. “Even if I am not a direct consumer of cathode, if there is a squeeze on availability, it will have an impact on the price,” he said.

The Vedanta closure will cut the nation’s production of refined copper by 40 percent to 510,000 tons in the year through March, Care Ratings’ Jagasheth said, but with Hindalco supplying about 80 percent of that and so much slated for export, the amount available locally is a lot less. Still, there may be fewer exports as some metal is diverted to domestic users, she said.

Consumption in India is set to expand more than 15 percent to 535,000 tons through March, Jagasheth said. Demand will continue rising, reaching almost 2 million tons a year in the next decade, driven by infrastructure, power and railways, Hindalco estimated last year. Plans to increase the country’s fleet of electric vehicles will also boost usage, she said.

Market Tightness
Scrap imports may also increase. “There’ll be a bit of a squeeze and those consumers who can replace cathode with pure quality of scrap, they may be prompted to look overseas,” said Shah from the recycling group. About 80,000 tons of copper scrap was imported in the year through March 2017, he said.

India’s need for more copper adds to tightness globally at a time when prices are near the highest in more than four years on fears of supply disruption in Chile, said He Xiaohui, an analyst with researcher Beijing Antaike Information Development Co. in Beijing. Still, given the volume of purchases relative to the size of the global market, the longer term impact is relatively limited, he said.
Source: Bloomberg

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