* Top copper users in cable industry facing shortages
* Copper imports have doubled since Sterlite smelter closure
on March 30
* Premiums jump on supply woes, No. 2 smelter shut for
By Krishna N Das
NEW DELHI, May 22 India's cable makers face a
severe shortage of copper and potential manufacturing delays
after the closure of the country's two biggest copper smelters,
which has pushed up prices and led to a spike in imports.
India's biggest smelter, owned by Sterlite Industries
, was shut on March 30 after local residents complained
of emissions that led to breathing difficulties, forcing top
copper users to rely on rival Hindalco Industries for
almost all their copper needs.
But a routine shutdown at Hindalco's Birla smelter this
month has raised fears that firms such as Finolex Cables Ltd
, India's largest electrical wire and cable maker, may
have to turn to costly imports or slow manufacturing.
Hindalco has declined to say how long the Birla smelter will
be closed, although industry sources expect a 35-day shutdown.
A fast-track environmental court will resume hearing a case
into Sterlite's closure on Wednesday and is expected to hear
further arguments. Lawyers in the case say a judgment should
come by end-May.
"I think the next period of 5-15 days is very critical,"
Deepak Mehta, executive director at cable maker Precision Wires
India Ltd, told Reuters.
Copper makes up about 80 percent of the raw material costs
for cable manufacturers such as Finolex and Precision.
"If the Sterlite smelter comes back on in the next few days,
the situation will improve. If it does not, it will be a serious
supply issue," Mehta said.
Irrespective of when the smelters reopen, June would be far
more challenging than May in terms of supply as the plants would
take time to ramp up and inventories would be exhausted, he
The Sterlite and Birla smelters account for about 90 percent
of India's total copper output of 690,000 tonnes. The telecom
and electrical sectors take up more than half of the country's
annual consumption of 610,000 tonnes.
Sterlite parent Vedanta Resources Plc is exporting
4,000 tonnes of refined copper a month from Dubai to help some
of its customers offset the supply loss, Sterlite Copper Chief
Executive P. Ramnath told Reuters last week.
Premiums for the purest form of copper have doubled since
the Sterlite shutdown, while imports have also doubled to about
8,000 tonnes a month from countries like Russia, Ramnath said.
Since the closure of the Sterlite smelter, premiums on
copper rods have shot up from $165 to about $290 per tonne, and
might go up to $350 per tonne, a trader with a Mumbai-listed
metals trading firm said.
"Importers are being aggressive and trying to cash in on
it," said Satyajit Misra, head of sourcing at Finolex, adding
there have been delays in delivery from Birla because of the
sudden surge in demand. "Until next month I am comfortable,
after that I don't know."
Finolex uses about 4,000 tonnes of copper a month, while
Precision Wires consumes about half as much, but the smelter
closures are also affecting smaller users.
Crompton Greaves, a $2-billion engineering firm
which is part of Indian conglomerate Avantha Group and makes
everything from transformers to toasters, relies on Sterlite for
its 9,000 tonnes per year copper needs in India.
"We are facing acute shortage of copper and fear production
loss," a company spokesman said via email.
(Editing by Amran Abocar and Richard Pullin)