Copper: Indian refined copper consumption surges in 2018 on robust economic performance and substantial new wire rod investments

The Indian economy grew by 7.1%, in the July-September three-month period, its slowest pace for three quarters and a deceleration from the 8.2% rate achieved in April to June quarter. Nevertheless, India continues to be the world’s fastest growing economy ahead of regional rivals Vietnam and China. Manufacturing output rose at a healthy 7.4% in Q3 while construction activity increased by 6.8%. Both of these sectors have contributed to a rapid rise in Indian refined copper demand so far this year, to feed the rise in wire and cable production. Roskill predicts that the rate of growth will exceed 9% in CY2018, with refined copper demand to reach 530-540kt.

The growth rate of the Indian economy has not been matched by the same pace of expansion in first use refined copper consumption over recent years. The main reason for this is peculiarities in the Indian trade tariff codes, which incentivise the import of price competitive copper wire rods and drawn copper wire below 6mm in diameter by consumers instead of buying from local Indian wire rod producers.  In 2017, India imported 245kt of wire rods and drawn wires from overseas suppliers in the UAE, Malaysia, Vietnam, Indonesia, Thailand, Japan and other countries. Although India has Free Trade Agreements (FTAs) with many of these countries, this has not stopped it from recently initiating an anti-dumping investigation on imports from Malaysia, Vietnam, Indonesia and Thailand. It is unclear whether this will have any material impact in view of the existing FTAs with these countries.

Meanwhile, a new generation of high efficiency continuous casting wire rod lines are being commissioned in India with the ultimate aim of replacing a sizeable proportion of these imports with local production. The first of these, a 240ktpy Contirod line at Hindalco’s Birla Copper unit, was started in March 2018 and has already resulted in a 39% surge in Hindalco’s wire rod output to 110kt in the March to September 2018 period compared to 79kt in the same period of 2017. Another 240Kktpy Contirod line in Halol, Gujarat state, was commissioned last week at Ryker Base Private, a joint venture between local Indian cablemaker Polycab Wires and trading house Trafigura. Meanwhile, a further 240ktpy capacity Contirod line will be started at Vedanta’s Silvassa plant before year-end. One third of Vedanta’s existing Indian wire rod capacity is currently idled as it forms part of the company’s Tuticorin smelter-refinery site which is currently closed pending the outcome of a court decision.

Roskill View:

India will have brought on-stream 720kt of new wire rod capacity in 2018, far more than the existing size of the entire Indian market. All of the new capacity is designed to use high purity cathode as feedstock with minimal high grade scrap input. It will be interesting to see how fast the new plants can be utilised and how successful they will be in displacing foreign imports. But even with minimal rates of capacity ramp ups, this should ensure the potential for double digit growth rates in Indian refined consumption growth over the next few years, albeit with some negative impact on existing overseas suppliers of wire rod and drawn wire.

Roskill’s new report Copper Demand to 2035: Global Industry, Markets & Outlook is due to be published in Q1 2019.
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