Sterlite issue: Supreme Court ruling raises concerns over continued copper imports

BL Research Bureau

The Supreme Court’s (SC) order refusing to allow the reopening of Vedanta’s copper plant in Thoothukudi, as ruled by the National Green Tribunal (NGT), will once again put the focus on the increasing copper imports into the country.

However, investors of Vedanta have little to worry as the stock price of the company had already factored in the impact of closure of copper unit, which is why the stock traded flat even after the SC’s ruling.

Supply skewed

India has been self-sufficient in refined copper production and has emerged as a net exporter of refined copper over the years. But, the shutting down of the Sterlite copper plant — which contributed 40 per cent of the country’s copper output — has changed the import-export dynamics of copper in the country.

Refined copper production fell 34 per cent y-o-y to 509 kilo tonne in January-November 2018. With consumption increasing at the rate of 5-6 per cent, there was a deficit of the metal supply within the country which was fulfilled by increasing the imports.

Also read:Sterlite re-opening row: Political parties, Vedanta submit letters to NGT

In the first 10 months of the 2018, India’s imports rose threefold to 62 kilo tonne, and exports plummeted 66.9 per cent to 109 kilo tonne, compared with the same period the previous year, turning India into a net importer of the metal from being a net exporter earlier.

The NGT’s order in December 2018 that allowed reopening of the plant was expected to normalise the situation and bring down the imports. With today’s SC order, the situation is back to square one and imports are expected to move northwards. However, this is not final as the company has been allowed to approach the Madras High Court.

Though LME (London Metal Exchange) copper prices spiked on news of closure of Vedanta’s Sterlite plant, it was later weighed down by trade tensions and lower than estimated growth in China, which consumes almost 50 per cent of world copper. MCX prices have been range bound ₹400-₹500 per kg.

Impact on investors

Vedanta’s Sterlite Copper has nearly 35 per cent market share in the country and caters significantly to cable manufacturers, winding wire units and transformer manufacturers.

However, for Vedanta’s investors, there will only be a marginal impact as the copper segment of the company contributes only about 5 per cent to the group’s operating profit.

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