CORRECTED-Trader Ushdev snares India copper sales after shutdowns

Thu Jun 27, 2013 6:27am EDT

(Corrects to remove source in 6th paragraph)

By Melanie Burton

SINGAPORE, June 27 (Reuters) - India's top private-sector metals trader, Ushdev International Ltd, has won a toehold in India's copper market after recent smelter shutdowns, and aims to add zinc and aluminium as it bids to take on big state-linked producers.

Ushdev, India's biggest nickel supplier with 40 percent of the market, had pounced on a copper supply squeeze after the two top domestic smelters were temporarily closed earlier this year, managing director Arvind Prasad told Reuters.

"The competition did not have production, so we got an opportunity. We sold about 2,000 tonnes of copper rods in that one to one-and-a-half months," Prasad said late Wednesday.

"We have about 100 customers to which we have supplied. Some are new, but our intent is from there to look at 10 to 15 of them who can then be our back-to-back long-term customers."

India's notoriously cut throat metals market is dominated by a handful of major producers such as Sterlite Industries , Hindalco Industries Ltd and Hindustan Zinc , which produce about 90 percent of the country's copper and meet 85 percent of its zinc needs.

The recent copper smelter shutdowns could open a window for alternative suppliers such as Ushdev, although major producers are likely to vigorously defend any challenges to their market share.

"What will happen now is that some of the people who source from Sterlite will now be a bit more careful and keep up relationships with alternative suppliers," said a trader, who declined to be named.

Trading companies like Ushdev have only a fraction of the market for metals such as copper and zinc, but hold a much bigger share of the nickel business, where India has little domestic production, and are active in ferrous metals and coal.

Rather than provoking a head-on challenge, Prasad hopes Ushdev can sidestep the big producers by nurturing a new customer base and beefing up its sources of supply of copper, zinc and aluminium to provide a cheaper alternative,

Mumbai-based Ushdev, capitalised at $190 million, also has offices in Hong Kong and Singapore, and sources most of its London Metal Exchange (LME) grade metals via Hong Kong-based Noble Group.

It snared the copper business when India's top smelter Sterlite closed for two months after complaints over emissions, creating a shortage that was exacerbated when Hindalco shut its Birla smelter for maintenance in May.

"We are working on a model where we will avoid direct confrontation with dominant players. Work around, rather than taking them head on," Prasad said.

The difficulty in cracking the metals market was demonstrated previously when Korea Zinc scaled back expansion plans in India in the face of stiff price competition from Hindustan Zinc, which is minority owned by the Indian government.

But Prasad is optimistic his company's business model is competitive enough to make inroads into copper and other metals. (Reporting by Melanie Burton; Editing by Richard Pullin)

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