Indian Copper Industry:

Focus
Poised For Escalating Growth
- Metalworld Research Team

T he copper industry is highly into ingots. The Indian copper industry

dependent on the performance
of and demand for products
like power and telecommunication
cables, transformers, generators,
radiators and other ancillary
components. Hence, its growth is
closely linked to the country's
economic and industrial growth.
Although, the industry is capital and
power intensive, entry barriers are
moderate. These basically relate to
economies of scale, access to ore
supplies and environmental issues. In
India, copper reserves are mainly
concentrated in Bihar, Rajasthan and
Madhya Pradesh and only public
sector Hindustan Copper Ltd (HCL)
has been allocated all these mines
having a copper content of just 1.2 -
1.3 percent against the world average
of 2 – 3 percent. Private copper
producers including Hindalco
Industries (Hindalco) and Sterlite
Industries (SIL), however, import
concentrate and then, produce refined
metal.
Major producers
The Indian industry can be classified
i n t o t w o b r o a d
categories—manufacturers of refined
copper (copper cathodes) and
manufacturers of copper products. Of
the three manufacturers of refined
copper, HCL is the only primary
producer, which mines and refines
copper; Hindalco and SIL process
primarily imported copper
concentrate to produce end products
like copper bars, rods and wires. Other
players include around 1,000 units in
the small-scale sector, which are
primarily involved in converting scrap
was opened for private sector
investment in 1992. Prior to 1992, the
industry was dominated by HCL, a
public sector undertaking (PSU)
owned by the government. HCL was
incorporated in November 1967 with
the objectives, inter alia, to carry out
mining operations and produce copper
and related products. HCL The Indian industry can
subsequently took over the copper ore
be classified into two
mines from National Mineral
broad
Development Corporation Ltd.
(NMDC). These mines are located at
categories—manufactu
Khetri and Kolihan in Rajasthan, and rers of refined copper
Rakha Copper Complex in Jharkhand. (copper cathodes) and
Till 1997, the only producer of primary manufacturers of
refined copper was HCL. The installed copper products
capacity for refined copper production
at its two integrated copper plants was
(and is) around 47.5 ktpa, which used
to meet approximately 25-30 percent
of India's requirement for refined
copper. The balance demand was met
through imports. The other two
producers of copper in India now are
Hindalco and SIL. Their present

19
May 2010

Focus
With the increasing shift
from fixed line to wireless
mode of
communication, there is
a threat for demand
growth for copper from
this segment
20
May 2010
Installed capacity for copper cathodes ('000 tonnes)
FY 2002 2003 2004 2005
Hindalco 150.0 150.0 250.0 250.0
Sterlite 165.0 165.0 165.0 165.0
HCL 47.5 47.5 47.5 47.5
Total 362.5 362.5 462.5 462.5
annual capacities are 500 ktpa and 405
ktpa respectively. Their plants are
based on imported copper
concentrate. Thus, the total installed
capacities for copper in India are
presently around 947.5 ktpa. In
addition, SWIL Ltd. is operating a 50
ktpa plant based on secondary route.
SIL is the largest producer of copper in
India, with an estimated production of
313 kt during FY2009. As there are
only three major players in the
domestic market, they offer limited
competition among themselves.
Apart from new production, scrap
copper supply in India is estimated at
around 100-115 ktpa. These include
cartridge brass disposed by defence
(17 percent); forgings, fabrication,
redrawing and machining (31
percent); old winding wire scrap (13
percent); copper cable scrap disposed
by users in electricity and telephone
(12 percent); and wire and cable units
(9 percent).
Distribution of copper usage in India
Till the late 1990s, the telecom sector
was the major customer segment
(accounting for 30-35 percent of
demand) for India's copper
consumption. Because of the rapid
expansion of the Indian telecom
network during the late-1990s,
copper usage in the telecom sector
increased from around 20 ktpa in the
early-1990s to around 105-110 ktpa
in the late-1990s. However, since
then demand has declined to around 65
ktpa at present. With the increasing
shift from fixed line to wireless mode
of communication, there is a threat for
demand growth for copper from this
segment. Also, in the fixed line
communication, optic fibre cables
(OFC) offer strong competition to
copper. Accordingly, the market for
2006 2007 2008 2009
500.0 500.0 500.0 500.0
300.0 400.0 405.0 405.0
47.5 47.5 47.5 47.5
847.5 947.5 952.5 952.5
copper usage in telecom sector has
declined during the last several years.
Over the past few decades, aluminium
has been the most important substitute
for copper, taking over substantial
market segments, on account of its
conductivity of electricity and heat, its
low weight, corrosion characteristics,
and lower prices relative to copper.
Aluminium weighs about one-third as
much as steel or copper. It is
malleable, ductile, and easily
machined and cast; and has excellent
corrosion resistance and durability.
However, in some applications,
despite being cheaper, aluminium
substitution has been restrained. For
example, in car radiators, although
copper is more expensive, it has
superior corrosion and heat
conductivity characteristics. Hence, a
copper radiator is expected to last
Distribution of Indian copper industry (%)
Electrical 36
Telecom 20
Engineering 9
Building and construction 9
Consumers durables 6
Transports 8
Others 12
longer, and less metal is required for a
given cooling performance. Copper is
also easy to work with, simplifying and

Focus
cheapening the manufacturing
process, especially where soldering
and brazing are involved. Even after
40 years of competition, copper is
maintaining a 40 percent share of the
car radiator market. Aluminium has
been taking over copper's traditional
markets in important electrical
applications. One such market is for
overhead conductors and
underground cables for carrying
electricity. Though aluminium is not as
good an electrical conductor
measured per unit of weight, its piping uses, improving such
lightness and tensile strength makes characteristics as durability or ability
aluminium cables of a given carrying to withstand chemicals and heat,
capacity both lighter and stronger and thereby strengthening their
far cheaper than cables made of competitive position versus copper.
copper. For these reasons, aluminium There are even reports about
has come to dominate long distance aluminium–plastic composite water
electricity transmission in recent piping. Such pipes, made of aluminium Even after 40 years of
decades. On the other hand, where tube that is laminated with interior and competition, copper is
space, cross section, ease of jointing exterior layers of plastic, are said to
and ability to stand high temperatures
maintaining a 40 percent
be lightweight, flexible, strong and
are of concern, e.g. in bus bars, share of the car radiator
corrosion resistant, and particularly
switchgear, transformers and well suited for hot and cold water
market
electrical generators, copper has been distribution indoors and outdoors.
able to maintain its competitiveness. The replacement of copper by optic
Threat from substitutes fibre for message transmissions in
Thus, substitution is prompted by telecommunication has proceeded at
many characteristics apart from price. fast rates ever since their commercial
Nevertheless, sometimes price introduction in such uses by the late
overwhelms other considerations, as 1970s. The substitution process was
the usage of silver demonstrates.
Silver is superior to copper in terms of
malleability, anti-corrosion, and as
electric conductor. However, on
account of its high price, the ability of
silver to penetrate copper's electric
markets has been limited to minuscule
segments where these characteristics
are particularly important.
Over the past half century, copper has
also faced challenges from plastics
and optic fibres in some market
segments. Thus plastics have partly
replaced copper in piping fresh water
into and waste water out of buildings.
Plastics have been tailor-made for

21
May 2010

Focus
initiated by telephone companies,
later joined by cable television
systems and local area networks. So
far, it has mainly involved long
distance trunk lines, while the ultimate
local connection has till recently,
At present, the demand
remained the preserve of copper.
for copper for primary
Substitution was prompted by the
copper production is met much higher productivity and
through two sources i.e. substantially lower overall cost of
copper ore mined from optic fibre. Copper's losses in these
indigenous mines and market segments are deemed to be
imported copper definitive and irreversible. Like in the
concentrates case of plastics, the fast product
development of optic fibre is likely to
strengthen its competitive strength
and result in further incursions into
copper's markets in the telecom
sector.
Limited domestic availability
22
May 2010
At present, the demand for copper for
primary copper production is met
through two sources i.e. copper ore
mined from indigenous mines and
imported copper concentrates. The
indigenous mining activity among the
primary copper producers is limited to
only HCL. Production of copper metal
in concentrate from mines has
stagnated at around 30 ktpa over the
last five years. Presently, HCL
imports around 40 percent of its
copper concentrates requirements to
supplement the shortages in
indigenous production. Hindalco and
SIL also import their requirements in
the form of copper concentrates.
Copper ore and concentrate is
primarily imported from three
countries—Chile, Australia, and
Indonesia.
SIL's consumption of copper
concentrates was 1,094 kt in FY2008.
In order to obtain a source for some of
its copper and copper concentrate
requirements, SIL acquired CMT in
2000, which owns the Mt. Lyell copper
mine in Australia, and Thalanga
Copper Mines Pty Ltd., or TCM in
2000, which owns 70 percent of the
Highway Reward copper mine in
Australia. This mine has since closed
in July 2005. CMT and TCM had been
acquired by Monte Cello BV, or Monte
Cello, in 1999, and SIL acquired them
through its acquisition of Monte Cello
in 2000. Although these mines
supplied around 10 percent of SIL's
copper concentrate requirements in
FY2007, the percentage has declined
to 8 percent in FY2008 and FY2009,
and is expected to decline as the
estimated mine life at Mt. Lyell is
approximately four years from April 1,
2009. In FY 2009, Mt. Lyell mined and
processed 2.4 mt of ore at a grade of
1.3 percent copper to produce 98.76
kt of copper concentrate, which also
contained 15,675 ounces of gold and
135,953 ounces of silver. Although the
grade of copper at Mt. Lyell is low, it
produces a clean concentrate that is
valuable in the smelting process.
In 2003, Hindalco also acquired two
captive copper mines in Mt. Gordon in

Queensland, Australia and Nifty in
Western Australia in 2003 through its
51 percent owned subsidiary Aditya
Birla Minerals Ltd (ABML). ABML
holds the mining and prospecting
licence area for these two copper
mines in Australia through its wholly
owned subsidiaries, Birla Nifty Pty
Limited and Birla Mount Gordon Pty
Limited. Total copper (cathode and
concentrates) production of ABML
was 82.4 kt in FY2008. As of March
31, 2008, the two mines had 32.2 mt of
reserves at an average copper grade
of 2.2 percent which contained proven
reserves of 23.7 mt at an average
copper grade of 2.4 percent and
probable reserves of 8.5 mt at an
average copper grade of 1.6 percent in
possible reserves. During FY2008,
approximately 26 percent of
Hindalco's copper concentrate
consumption of 1,150 kt came from
these two Australian mines. The
balance was through long-term
India copper balance sheet ('000 tonnes)
Production Consumption
2001 325 293
2002 374 301
2003 391 307
2004 419 335
2005 518 397
2006 627 407
2007 719 475
2008 669 500
suppliers (58 percent), and spot
markets (17 percent).
As Indian smelters rely on overseas
markets for almost their entire
requirement of copper concentrates,
their profitability is strongly
dependent on the international
variation in Treatment Charges and
Refining Charges (or TcRc) which is
defined as the difference between the
cathode prices and the concentrate
prices. The buyers of copper
concentrates from mining companies
are the smelters and refiners of
Focus
copper. India accounts for less than 5
percent of the global capacity for
copper, and thus has limited influence
on copper prices on the LME.
However, prices on the LME do have
an effect on domestic prices, since
they determine the TcRc charges, and
influence the landed price of imported
metal.
Low per capita consumption
The per capita consumption of copper
The per capita
in India is currently at 0.4 kg per
annum, which compares poorly with consumption of copper
China's per capita consumption of 3 kg in India is currently at 0.4
per annum. However, India's per kg per annum, which
capita consumption is unlikely to compares poorly with
increase at the same rate as China. China's per capita
China's per capita consumption at a consumption of 3 kg per
given income level is higher than in the annum
other emerging markets, mainly
because it has a higher share of
industry in GDP. By comparison,
India's industrial sector has a much
lower share in GDP. As such, while
copper consumption in India is
forecast to grow strongly over the
medium-term, it is not expected to
replicate the very strong growth trend
evident in China. Copper's future
trend will be decided on upcoming
demand from housing and electrical
sectors that are expected to see a
boom in future.

23
May 2010