International Copper Association (ICA) India has commenced a study on the "possible impact" on domestic industry of the closure of Vedanta's Sterlite Copper unit in Tamil Nadu. The state government in late May ordered permanent closure of the smelter after 13 people among protesters demanding its shutdown on environmental concerns were killed in police firing.
"Vedanta's plant closure...will have a direct impact on supplies to the downstream and ancillary industry. We are conducting a study to assess the possible impact of closure," Sanjeev Ranjan, ICA India managing director told PTI.
Billionaire Anil Agarwal-owned Vedanta unit is one of the three primary copper producers in the country, Ranjan said, adding that "of the total domestic refined copper usage amounting to 6,71,000 tonnes, Vedanta has a market share of 35 per cent".
The study will be concluded by the end of next month, he said.
The closure of the plant may lead to shortage of copper for the industries like consumer goods, electrical and electronics, automobile, Ranjan said.
Of the overall copper usage in India, the electrical applications sector accounts for about 54 per cent, he said.
The rise in demand for copper in India has grown by a compound annual growth rate (CAGR) of 5 per cent in 2006-2016.
The downstream and ancillary industries which make finished products from semi-copper items is likely to be hit hard due to the closure.
"The shortage may also lead to rise in imports of cathode and wire rods. Due to this the import cost will rise as copper industry will have to depend on imports of cathode and wire rods which has import duty of 5 per cent. The increased cost burden due to import duty will be passed on to the consumer by making the product costly." Ranjan said.
On the other hand import of finished goods from the Association of Southeast Asian Nations (ASEAN) region comes under zero duty as per the Free Trade Agreement (FTA). This could lead to rise in imports of finished goods at the cost of domestic producers, he said.
Besides, he added, there might be a rise in low grade copper from the secondary route.
Source: moneycontrol.com