Despite Falling Global Copper Prices, Indian Copper Smelter Story Still Upbeat

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Indian copper refiners led by the nation’s largest refining company, Sterlite Copper, cannot be too bothered by the downturn in global copper prices.

Hopes of a revival in copper prices in the second half of 2012 apart, Indian refiners are in good shape because refining rates have been climbing steadily instead of following the spiraling global metal prices.

A recent report in the Business Standard reported that despite a downward trend in global copper prices, the rates for refining the metal have gone the other way.

India’s copper industry major and the Anil Agrawal-controlled Vedanta group company, Sterlite Copper, is not worried despite the fact that copper prices have been on a downward slide. Copper prices are already 15-20 percent lower year-on-year.

But company officials were quoted as saying that the refining charges they had received over the last months were up, and were expected to move even further north. Sterlite is also betting that the high refining charges will ultimately bolster its margins for this fiscal year.

Overall, copper producers globally are hoping for a price revival, banking on an uptake in China’s copper demand. Late last month, a report by Aurubis, Europe’s largest copper smelter, said the expected revival would help boost the global markets, especially in a depressed European market due to the euro zone crisis.

In the last few weeks, LME copper prices have generally been range-bound between $7,500 and $7,700 a ton.

Normally, the trend is that when copper prices are down, refining charges, also known as Tc/Rc (treatment and refining charges) also take a dip. But this year, they have bucked the general trend, in India. These charges, according to the Business Standard report, have been negotiated at 16.33 cents per pound for the calendar year, and keeping the rise in spot Tc/Rc charges in mind, these charges were likely to go up even further for Sterlite Copper.

The upbeat mood is also reflected in the upward movement of shares of copper refiners including Hindalco at the LME.

For now, with the demand for finished copper falling, several global copper smelters have cut capacities in the last few months. But mines have started mining more ore to produce copper concentrates, leaving a gap in the demand and supply. All of this also means the refining process becomes even more important, and because of which refining charges in India have started moving up. Indian companies have also retained their annual volumes, as compared to other global refineries.

Sterlite Copper, for example, has negotiated for Tc/Rc of 16.33 cents per pound for the July-September quarter, up from 12.5 cents per pound in the June quarter.

The company was already ramping up production volumes of refined copper to beat the general downturn. Added to that, the depreciation of the Indian rupee meant better refining rates, according to Sterlite’s CEO P. Ramnath.

Two other factors are likely to contribute further in the coming days to the positive refinery rates. The expected rise in demand from China was likely to push Tc/Rc charges. The other was the Indian government’s expected push to the power and infrastructure sectors, which could lead to double-digit growth in India’s copper demand.


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