Copper smelter shutdown causing deficit, price rise

Vedanta Resources Plc’s shutdown of its South Indian copper smelter, one of India’s biggest, is causing a copper deficit and increased prices in India, its subsidiary Vedanta Ltd said on Friday.

The smelter, located in a sleepy port city near the tip of the Indian peninsula, has a share of about 35 percent in the India’s primary copper market and exports mainly to Gulf and Asian countries, Vedanta said.

The unit has been shut for more than 50 days.

“Due to non-availability of our production, there is a deficit of copper supply in the country impacting prices and availability,” Vedanta Ltd said in a statement on Friday.

The plant, which can produce 400,000 tonnes of copper a year, will remain shut until at least June 6 as the local pollution regulator will not allow it to operate due to alleged non-compliance with environmental rules..

Copper prices hit more than six-year lows in 2016 but have gained more than 50 percent from those levels. The benchmark three-month copper contract on the London Metal Exchange was trading at $6860.50 at 1351 GMT.

The company said the shutdown was also causing an increase in the price of sulphuric acid, a smelting byproduct used to make fertilizers. The smelter, controlled by the company’s majority-owned Indian subsidiary Vedanta Ltd, has been the target of protests by the people of Thootukudi, where the plant is located. They have thronged the streets and shut shops demanding a closure of the plant.

The plant was shut for more than two months in 2013 by an Indian environmental court after complaints from residents over emissions. Locals and environmentalists have said Vedanta’s smelter is a major source of pollution and a risk to fisheries.

Vedanta says the protests are based on “false allegations” and plans to double capacity at the smelter to 800,000 tonnes per year.

Cable makers in India, such as Finolex Cables Ltd and Precision Wires India Ltd, have traditionally bought copper from the two biggest producers, Vedanta’s Sterlite and Aditya Birla Group’s Hindalco Industries Ltd.

Copper is mainly used to make wires and cables and to make electronic devices, transformers and motors.

Based on current local demand growth of 7-8 percent per year, India may turn into a net importer of copper by the year ended March 2020 if no new plant is commissioned, consultancy firm ICRA Ltd said in a report last month.