Indias Copper Needs Back
INTERVIEW: India’s copper demand to triple by 2030, says global body
Informist, Thursday, Jun 30, 2022
By Sandeep Sinha and Sayantan Sarkar
MUMBAI – India's copper consumption is likely to triple to nearly 3 mln tn by 2030 driven by growth in electric vehicles and other environment-friendly technologies, said Mayur Karmarkar, managing director, International Copper Association India.
In 2020-21 (Apr-Mar), India consumed 1.0 mln tn of copper, down from 1.2 mln tn a year ago, mainly due to economic impact of the COVID pandemic.
Rising middle-class incomes will also augment demand. "We expect a better future for the Indian copper industry as the bulging middle class will push the demand higher," Karmarkar told Informist in an interview.
"The demand for copper is directly dependent on economic growth and the quality of the growth," the head of the Indian arm of International Copper Association said.
To meet the high demand, the country will likely import more copper, said Karmarkar, citing an internal study by the International Copper Association.
Since 2018, India has become a net importer of the metal due to the closure of Sterlite Copper's plant at Thoothukudi, Tamil Nadu, which catered to around 40% of the domestic demand.
The Tamil Nadu Pollution Control Board ordered the plant's closure after massive protests by locals, social and environmental activists who alleged that the facility was causing widespread and severe pollution in the area, leading to many suffering from serious diseases.
"To fill the vacuum created by the closure of the plant, India will continue to import refined copper to a great extent," Karmarkar said.
Following are the edited excerpts of the interview:
Q. Where do you see India's copper demand in the coming years?
A. According to a study commissioned by the (International Copper) Association, copper usage in the country is likely to witness a substantial jump in 2020-30 led by growth in building and construction, the manufacturing industry, transport, consumer durables and diversified sectors. Copper demand is expected to touch 2.8 mln tn over the next eight years from 1.2 mln tn in 2019-20, growing at a compound annual growth rate of 8.9% through higher penetration of electric vehicles, use of green technologies and clean energy transition.
Q. How has COVID-19 impacted the demand for copper in India?
A. The COVID-19 pandemic has negatively impacted all the sectors of the economy and the Indian copper industry is no exception. The demand for copper is driven by its usage in building construction and public infrastructure sectors, power sector, consumer durables, as well as automobile and manufacturing sectors. These drivers have been severely impacted by the slowing down of economic activities since March 2020. As per official estimates, the Indian economy grew 8.7% in 2021-22. It is recovering rapidly from the impact of COVID-19 and the growth trajectory ahead looks firm. Even though the 2021-22 copper demand numbers are still not available with us, we feel that they will be similar to the pre-COVID level.
Q. Do you see any changes in domestic consumption patterns?
A. Demand for copper is directly dependent on economic growth and the quality of the growth. This can be explained using the S-curve of wealth creation. History has shown that as countries become richer, their commodity consumption rises at an increasing rate before eventually stabilising at much higher levels. Once the country's GDP per capita crosses the flex point, its commodity consumption begins to rise faster over the following years. Simply put, as more and more people join the middle class, their consumption rises, and they tend to use more energy, electricity, automobiles, appliances, etc. India is at the first stage of the S-curve, with per capita copper usage of 890 gm. In contrast, countries such as China and the US consume 8.9 and 5.6 kg per capita, respectively. However, India is nearing the flex point on the S-curve. Its GDP per capita will soon be where China's was in 2001, right before the last commodity bull market began.
Q. How much copper did India import in 2020-21 compared with the last fiscal year?
A. As per estimates by the International Copper Association, India's copper demand shrunk to 1 mln tn in 2020-21 from 1.2 mln tn in the previous fiscal year due to the lockdowns. In the last few years, India's copper industry has suffered a huge body blow, leading to the loss of production and precious outflow of foreign exchange. Copper production fell sharply to 409,000 tn in 2019-20 from a peak output of 848,000 tn in 2017-18. Similarly, exports fell to merely 31,000 tn, or $186 mln, in 2019-20 from 421,000 tn, or $2.7 bln, in 2017-18. Imports, on the other hand, have risen sharply from 215,000 tn, or $1.4 bln, in 2017-18 to 341,000 tn, or over $2 bln, in financial year 2020. The import quantum and outflow of foreign exchange will only go up in the current financial year as a result of the shutdown of Sterlite Copper's operations.
Q. How much will India's import of copper rise in the coming years?
A. Unfortunately, despite the government's thrust on Make in India, Atmanirbhar Bharat and adequate domestic capacity, we will end up sourcing half of our requirement through imports. India was a net exporter of copper for close to two decades before the closure of Sterlite Copper's plant at Tuticorin (Thoothukudi). In 2018, India became a net importer of copper for the first time… and will continue imports of refined copper to a great extent. India earned a net foreign exchange inflow of $1.1 bln on account of copper exports in 2017-18. However, after the shutdown of Sterlite Copper's smelter, India now incurs a net foreign exchange outflow of $1.2 bln due to imports every year. The industry adjusts to that by paying more to get copper. There are also issues of quality of the recycled product, and the impact on the environment as the industry is very unorganised.
Q. Copper prices hit a lifetime high in global and Indian markets recently. Do you see any impact of that on demand?
A. India is still a very young economy where the ratio of metal intensity to economy is much smaller for copper. For instance, India's GDP is around $3 trln, where copper's contribution is merely $10 bln, or 0.3%. Hence, any price change in copper will not have a larger impact on the usage in India.
Q. How do global copper supply disruptions affect India?
A. India's copper usage is at a very nascent stage and any geopolitical disruption does not have any major impact on it. With only one smelter operating, India's dependence on South America for copper concentrate is low. Southeast Asia, Japan and the Middle East have emerged as new trade partner countries for India. As per government data, the major copper imports from these regions include cathode, rods, tubes and pipes, plates and sheets, wires, and scrap.
Q. What kind of impact will the tightening of monetary policy by global central banks have on the consumption of copper?
A. In India, 50% of copper usage is in building construction, transportation, and consumer durables sector. Tightening of interest rates and inflationary pressure will impact the demand in these sectors, impacting overall consumption.
Q. Copper is a key metal when it comes to transition towards green energy. How much will the price swings impact it?
A. Copper, aluminium, nickel, chromium and zinc are the critical elements for clean energy technologies. There is no relation between the price of these elements to the pace of clean energy transition. The pace of clean energy transition is driven by the government's commitment towards reducing emissions levels in several areas. India's annual growth for the red metal is expected to be around 6-8% to support the clean energy transition agenda, and growth in sectors such as electric vehicles, infrastructure and housing. These mega-trends will need large amounts of copper–from electrical wires to tubes in air conditioners–with different intensity. End
Edited by Namrata Rao