With the plant that has the capacity to produce 4 lakh tonnes of copper per year, and meets a third of the sales in the country, being shut, user industries such as makers of electrical cables, which have seen a sharp spike in imports, are planning to increase prices following the rise in input costs.
Salzer Electronics, which makes electrical cables and wires, had to nearly double its copper imports due to the closure of the plant. The company, which was importing 100 tonnes of copper per month, has increased it to about 180 tonnes per month in the past two months.
“We will have no choice but to increase prices of electrical cables and wires as copper is the main ingredient in these products,” said R Doraiswamy, managing director, Salzer Electronics. The company was buying about 250 tonnes of copper rods every month from Sterlite’s Tuticorin plant.
“We already have 7%-8% shortage of copper wires. The closure would result in a huge shortage of copper. This would lead to higher prices,” said a senior official in the pumpsets industry. “We will have to increase pumpset prices,” he said.
Since hitting a low of ₹425 per kg on March 27, copper prices have been on a steady uptrend. It is now ruling at around ₹465 per kg in the spot market. Prices hit a high of about ₹470 per kg on May 23. Prices are ruling above the 200-day moving average levels.
Though Salzer also buys copper from Birla Copper, a unit of Hindalco Industries, the company said it would not be able to source more locally. “We would not be able to get more copper locally as the demand is very high,” a senior Salzer official said.
If the domestic demand for copper grows at the current rate of about 7%- 8%, the market is likely to turn into a deficit in the next couple of years, ratings agency ICRA has estimated in an April 4 forecast, just days after the Sterlite unit was shut for scheduled maintenance. “The scope of increasing copper production in India is limited as the refiners are already running their plants at high capacity utilisation levels,” it said.
“Hence, with demand increasing at a healthy rate, India may turn into a net importer of copper by FY2020 (2019-20) if no new plant is commissioned in this period,” the agency said. Sterlite, which is a subsidiary of UK-based Vedanta Resources plc, owns one of the two custom copper smelters in India and, according to International Copper Association (India), had a 33% market share by sales volume in fiscal 2017, which ended on March 31, 2017. The other major custom copper smelter in India is operated by Hindalco Industries.
Consumer durable companies such as Bluestar and Godrej, however, see no immediate impact owing to the shutdown. B Thiagarajan, joint managing director, BlueStar, said the copper tubes used in their air conditioners are imported and hence, the shutdown would not have much impact.
(With inputs from Aparna Desikan)