India will retain its tag of net copper importer through the rest of FY20 following the continued shutdown in Sterlite Copper’s smelter in Tuticorin. A report on the outlook of base metals for the second half of the current fiscal by credit ratings agency CARE said that by the end of FY20, India’s refined copper production will be around 450 KT (kilotonnes), registering a 1.5% drop from its FY19 level of production.
“Domestic refined copper production has fallen by 3.1% during H1-FY20. The production in the current financial year still continues to be stressed with the permanent shutdown of the 400-KT Tuticorin smelter which accounted for 40% of the country’s copper smelting capacity," the report said. “Shutdown of the Tuticorin smelter has led to the domino effect of a sharp increase in the country’s imports and fall in the exports, thus turning India into a net importer of refined copper. Exports have fallen by 40%, whereas imports have increased by 67.6%."
Demand for copper in the domestic market is largely dependent on the electrical & telecommunications (56%), building & construction (8%), automobiles (11%) and the consumer durables (8%) segments.
CARE Ratings estimated that domestic refined copper demand would increase 7%-8% (including consumption of scrap) by the end of FY20, especially because of growing demand from the power sector, given the government’s thrust on renewable energy, and demand from households for consumer durables.
Manufacturing of hybrid and electric cars will also augment the consumption of copper as EVs use 2-3 times more copper than traditional internal combustion engines.
Meanwhile, among other base metals, India’s primary aluminium production is estimated to rise 3.7% during FY20 as all domestic smelters are operating at full capacity. “Growth in demand (including secondary demand) is likely to remain stable and is expected to range around 6% to 7% during FY20. The growth in consumption is likely to be driven by the growth in power transmission and packaging sector," the report said.
Zinc demand is likely to increase 3%-4% by the end of FY20 as well, with growth in consumption being driven by issues of rust and corrosion in steel (in accordance to the growth in the steel industry).
The agency concluded that the outlook for the rest of FY20, in terms of consumption of base metals, is seen subdued due to less promising prospects, slow recovery and slowdown in most of the end-use sectors. “The continued tariff/trade wars have affected the base metals industry during the whole of FY19, and in the current financial year, it has continued to depress the prices of base metals resulting in affecting the revenues and margins of non-ferrous manufacturers."