One of India's largest copper production plants - Sterlite Copper at Tuticorin - is shut. The closure is likely to cost India USD 2.8 billion in Forex annually, according to an estimate. India produces less than 10 per cent of the total copper production in the world. Sterlite Copper produces about half of India's total copper output. In 2017-18, the company produced about 48 per cent of country's total copper output of 842,961 tonnes. Shutting down the plant is likely to force India to import more.
Sterlite Copper CEO P Ramnath recently said that since Vedanta Sterlite is one of the largest copper producers in the country, manufacturers in sectors ranging from electrical to defence will have to turn to imports and that will push up the nation's annual import bill by an estimated USD 2 billion based on the current price. Market analysts say that the shortage of copper in domestic market can create a temporary spurt in prices (up to about 2 per cent) from the current level of around Rs 455 per kg in the physical market.
In an interview to Business Today, Sterlite Copper CEO said that the Sterlite Tuticorin unit was the seventh largest smelter in the world and, when operational, it used to meet 36 per cent of the total domestic copper market demand in the country with the balance getting exported. He also said that the sudden and arbitrary decision of Tamil Nadu government to close down Tuticorin unit will have far-reaching ramifications for the economy of not only the town and its adjoining villages but also the country.
"While an estimated 30,000 direct and indirect jobs are now on the line, a large number of small to medium enterprises that are dependent on our smelter for copper are also likely to suffer due to supply disruptions," Ramnath said. Sterlite's Tuticorin facilities include a custom smelter, a refinery, a phosphoric acid plant, sulphuric acid plants and a copper rod plant.
Sterlite's Tuticorin unit recorded the highest ever production and the best-in-class operational efficiencies during FY17. The full year copper production at Tuticorin was a record at 402,000 tonnes. After shutdown of the plant, India's export to international market will be majorly hit which is likely to push the global prices of copper. India exports around 160,000 tonnes of total copper production in the global market.
Speaking on the closure of Tuticorin plant, Research analyst at Angel Broking Kaynat Chainwala said that "The domestic production is going to be impacted because it is one of the topmost producers of copper. Also, it could have an impact on downstream manufacturers. However, it may not have a huge impact on pricing as that is impacted to a large extent by global developments." The decline in global prices has been more than that in the domestic market due to the rupee depreciation. The months of June and July are generally a low seasonal demand period for copper.
The Tamil Nadu government's move to close down the controversial unit came after a month-long deadly protest against the company which allegedly failed to curb pollutions stemming from copper smelters.