Copper smelter closures put cable makers in tight spot

NEW DELHI Wed May 22, 2013 12:44pm IST

An employee works inside the power cable testing laboratory in Rajasthan August 6, 2012. REUTERS/B Mathur/Files

An employee works inside the power cable testing laboratory in Rajasthan August 6, 2012.

Credit: Reuters/B Mathur/Files

Related Topics

Stocks

   

NEW DELHI (Reuters) - India's cable makers face a severe shortage of copper and potential manufacturing delays after the closure of the country's two biggest copper smelters, which has pushed up prices and led to a spike in imports.

India's biggest smelter, owned by Sterlite Industries STRL.NS, was shut on March 30 after local residents complained of emissions that led to breathing difficulties, forcing top copper users to rely on rival Hindalco Industries (HALC.NS) for almost all their copper needs.

But a routine shutdown at Hindalco's Birla smelter this month has raised fears that firms such as Finolex Cables Ltd (FNXC.NS), India's largest electrical wire and cable maker, may have to turn to costly imports or slow manufacturing.

Hindalco has declined to say how long the Birla smelter will be closed, although industry sources expect a 35-day shutdown.

A fast-track environmental court will resume hearing a case into Sterlite's closure on Wednesday and is expected to hear further arguments. Lawyers in the case say a judgment should come by end-May.

"I think the next period of 5-15 days is very critical," Deepak Mehta, executive director at cable maker Precision Wires India Ltd (PRWR.NS), told Reuters.

Copper makes up about 80 percent of the raw material costs for cable manufacturers such as Finolex and Precision.

"If the Sterlite smelter comes back on in the next few days, the situation will improve. If it does not, it will be a serious supply issue," Mehta said.

Irrespective of when the smelters reopen, June would be far more challenging than May in terms of supply as the plants would take time to ramp up and inventories would be exhausted, he added.

The Sterlite and Birla smelters account for about 90 percent of India's total copper output of 690,000 tonnes. The telecom and electrical sectors take up more than half of the country's annual consumption of 610,000 tonnes.

Sterlite parent Vedanta Resources Plc (VED.L) is exporting 4,000 tonnes of refined copper a month from Dubai to help some of its customers offset the supply loss, Sterlite Copper Chief Executive P. Ramnath told Reuters last week.

Premiums for the purest form of copper have doubled since the Sterlite shutdown, while imports have also doubled to about 8,000 tonnes a month from countries like Russia, Ramnath said.

Since the closure of the Sterlite smelter, premiums on copper rods have shot up from $165 to about $290 per tonne, and might go up to $350 per tonne, a trader with a Mumbai-listed metals trading firm said.

"Importers are being aggressive and trying to cash in on it," said Satyajit Misra, head of sourcing at Finolex, adding there have been delays in delivery from Birla because of the sudden surge in demand. "Until next month I am comfortable, after that I don't know."

Finolex uses about 4,000 tonnes of copper a month, while Precision Wires consumes about half as much, but the smelter closures are also affecting smaller users.

Crompton Greaves (CROM.NS), a $2-billion engineering firm which is part of Indian conglomerate Avantha Group and makes everything from transformers to toasters, relies on Sterlite for its 9,000 tonnes per year copper needs in India.

"We are facing acute shortage of copper and fear production loss," a company spokesman said via email.

(Editing by Amran Abocar and Richard Pullin)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Rising Inflation

Rising Inflation

Food prices push inflation up, limit RBI's room to act.  Full Article 

New Direction

New Direction

New CEO Nadella pushes data culture at Microsoft.  Full Article 

Infosys Results

Infosys Results

Infosys says staff exodus a worry after Q4 profits beat estimates  Full Article 

Deal Talk

Deal Talk

Diageo in $1.9 billion bid to raise stake in United Spirits.  Full Article 

Reuters Poll

Reuters Poll

Domestic fund managers start to bet on own economy  Full Article 

S&P on India

S&P on India

India's policy reforms to affect sovereign ratings - S&P.  Full Article 

Toyota's Performance

Toyota's Performance

After two bumper years, Toyota braces for shift to slower growth.  Full Article 

Third Gender

Third Gender

Supreme Court recognises transgenders as third gender in landmark ruling.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage