It’s no secret that India’s industrialization and urbanization plans are set to get fresh impetus, and state-owned Hindustan Copper (HCL) wants a piece of the action.
HCL expects the demand for copper to touch 1 million tons by 2017. So, with an eye on this, and its own future, the public sector copper major recently announced it was seriously contemplating diversifying into downstream products, something that will change it from a commodity producer to a products company.
According to 1 estimate, the Indian market for downstream copper products was around 1 lakh ton, which makes its size about US $97 million (Rs 600 crore).
HCL, a Government of India enterprise set up in 1967 is India’s only vertically integrated copper producing company encompassing mining, smelting, refining and casting of refined copper metal. It also holds all existing mining leads for copper reserves in India.
According to a report in Business Standard HCL will buy a minority stake in an existing company to grab a toe-hold in the value-added products market that is estimated at 100,000 tons per year in India.
This was announced by company Chairman and Managing Director K.D. Diwan. He said HCL would buy more than 26% but less than 50% in the closely held firm. The top honcho was unwilling to reveal details, not even the name of the company, until a final agreement was in place. Such downstream products were likely to generate about 20% of business for his company.
To start with, it plans to supply 10,000 tons of copper rods to this unnamed partner. Rail is one sector which the company will be seriously looking to supply product to. In addition, HCL has also decided to get into the business of recovery of precious metals. It plans to invest about US $4 million (Rs 30 crore) for recovery of metals from ore trails, and was in the process of choosing a technology partner for this.
After its annual general meeting of shareholders recently, Diwan told reporters that the products of the partner company command a 25-30% premium. These will be converted into sheets, tubes, wires and extrusions.The government has planned a US $1.2-trillion investment for the infrastructure sector in the next five years, which analysts say, will improve the demand of copper in coming years.
Diwan said HCL plans expansion of 8 mines, and the capital expenditures over the next 5 years will be in excess of about US $5 billion (Rs 3500 crore).
HCL wants to enhance its mine production capacity to 12.4 mtpa by 2017, and has planned an investment of US $750 million. For exploration in existing mines to discover additional reserves, it has planned an annual investment of $2 million.
India ranks in the top 20 major copper producers in the world. It is also one of the world’s biggest importers of the metal, along with China, Japan and South Korea. Around 30% of India’s copper demand is from the telecom sector and 26% from the electrical sector.
Last year, India consumed 5.5 lakh tons of refined copper, but its per capita consumption is very low as compared to the world average.