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It may not impact straight away, but if it’s a sustained shutdown, I’m talking more than a few weeks from here, then it will start to have a meaningful impact. Daniel Hynes, senior commodities strategist at ANZ
MUMBAI/ THOOTHUKUDI,
India: Indian electrical goods manufacturers will have to rely more on imported copper and are bracing for a rise in costs, after the government in the southern state of Tamil Nadu this week ordered the permanent closure of Vedanta’s copper smelter there.
Industry executives and analysts say this is likely to lead to an increase in prices of a wide range of products from power cables to electronic appliances, and televisions to auto parts, as manufacturers look to pass on the cost increases at a time when a weaker rupee and a surge in crude oil prices have put pressure on profit margins.
And while international copper prices are not expected to climb as a direct result of the closure in the next few weeks, if the plant is permanently shut there could be an impact.
“It may not impact straight away, but if it’s a sustained shutdown, I’m talking more than a few weeks from here, then it will start to have a meaningful impact,” said Daniel Hynes, senior commodities strategist at ANZ in Sydney.
India consumes 1.5 million tonnes of copper annually, half of which has been produced by two companies inside the country - Vedanta Ltd, a unit of Londonlisted Vedanta Resources, and Hindalco Industries, a unit of the Aditya Birla group. The remaining copper demand is met largely via imports.
On Monday, the state government in South India ordered the permanent closure of Vedanta’s 400,000 tonnes copper smelter after protests last week led to the killing of 13 people.
“We are expecting an increase of at least 200,000 to 250,000 tonnes of copper imports for this year,” said Shreegopal Kabra, managing director of RR Global, a wire manufacturing firm that is one of the largest consumers of copper in India.
Copper import costs are also likely to rise by five to 15 rupees per kilogram, driven by strong demand and a weak rupee, said Kabra, who heads India’s biggest electrical industry lobby group, Indian Electrical & Electronics Manufacturers’ Association (IEEMA).
Among its emerging economy peers, the rupee has been one of the worst performing currencies against the dollar in recent months.