Hindalco's copper biz to double value-added products contribution by 2018

Company to take value-added product contribution to 80% from 35%

In a bid to beef up its copper earnings, Hindalco Industries is set to more than double the contribution of value-added products to the red metal business by early 2018. 

“Our copper unit expansion is underway and it will take the contribution of value-added products to 80 per cent from 35 per cent at present,” J C Laddha, group executive president at Birla Copper, the copper division of Hindalco Industries, told Business Standard. He was speaking on the sidelines of India Copper Forum held here this week.

With an investment of a little more than Rs 200 crore, the company has planned the commissioning in the first quarter of 2018.

“Since premiums for value-added products is higher, the focus is on this particular segment,” Laddha said. “We also have a separate team dedicated to look at which all value-added products can be added to the copper business so that earnings improve.”

Though Hindalco's copper business normally contributes about 25 per cent to the company's profits and 65 per cent to its revenue, in select quarters last year, the business held the fort for the company as weak aluminium prices made the situation tough for Hindalco. 

The Aditya Birla Group firm has a copper smelter complex at Dahej in Gujarat which produces copper cathodes and continuous cast copper rods of various sizes.

Though the expansion is expected to churn better earnings for Hindalco's copper business, analysts are of the view that in the overall scheme of things, the number is small for Hindalco Industries.

“On an average, this expansion will make additional margins but the market is quite volatile and given the entire business, this number will be small,” said an analyst with Motilal Oswal.

Meanwhile, Hindalco Industries' peer in the copper business, Anil Agarwal-led Vedanta, is also doubling its copper capacity at Tuticorin in Tamil Nadu to 800,000 tonnes and has already received environmental clearance. 

“Our expansion will cater to the overseas market as domestically the demand is getting eaten up by imports,” said P Ramnath, chief executive officer at Sterlite Copper.

Currently, Vedanta is the second-largest copper producer in the country after Hindalco Industries. India imports 97 per cent of the copper concentrate to produce finished products. With rising imports of finished copper products, the domestic industry has recently urged the government to do away with the 2.5 per cent import duty on copper concentrate.