Indian smelters raise copper output

Respond to higher conversion charges despite dip in primary prices; trend similar to global markets, likely to continue

Indian copper smelters raised output 33 per cent in April-November over a year before, to take advantage of higher conversion rates — treatment and refining charges (Tc/Rc) in industry parlance.

Data from the mines ministry showed refined copper output at 497,847 tonnes in April–November, the first seven months of this financial year, as compared to 374,418 tonnes in the corresponding period last year.

Aditya Birla Group company Hindalco Industries posted a 26.6 per cent growth in output to 257,261 tonnes in this period. The Vedanta group’s Sterlite Industries reported a 42 per cent rise. Government-owned Hindustan Copper had a 13.6 per cent rise in output at 10,038 tonnes, from 8,838 tonnes in the same period last year.

“Our output suffered last year due to plant closure, owing to environment issues. After recommencement, the plant is operating with full capacity. Over and above, there was a 10 per cent increase in the prices of byproducts, including sulphuric and phosphoric acid. Apart from that, the premiums on primary copper have gone up by 10 per cent so far this year,” said P Ramnath, chief executive officer of Sterlite, which contributes around half of India’s copper production.

Phosphoric acid is trading at $760 a tonne as compared to $680 a tonne at the beginning of this year. Copper is selling at a premium of $220 a tonne in India.

Indian copper smelters raised output despite a fall in prices. On the benchmark London Metal Exchange, the price is $6,361 a tonne, a decline of four per cent from $6,632 a tonne on April 1.

“We are a custom-built producer. Hence, the price variation does not affect us. We are only concerned about Tc/Rc, premiums and byproduct’ prices,” said Ramnath.

Global miners agreed to pay smelters a 31 per cent increase in Tc/Rc at $92 a tonne and 9.2 cents a pound (lb) for 2014. Negotiations are on for a further 20 per cent increase in Tc/Rc for 2015, at $115 a tonne and 11.5 cents a lb, respectively.

Jayanta Roy, senior vice-president with rating agency Icra, said, “A higher Tc/Rc augurs well for Indian smelters. But, a major portion of the surge in output can be attributed to technical issues.”

The output trend in India is similar to global markets. The latest monthly report of the International Copper Study Group said world output of primary refined copper was 13.7 million tonnes in the January–September period of 2014, compared to 12.7 mt in the same period last year.

“Higher production will fetch better margins for Indian copper smelters, on increased Ebitda (operating earnings) margins. As long as global mine production would continue to rise, Indian smelters would fetch higher Tc/Rc,” said Goutam Chakraborty, analyst at Emkay Global Financial Services.

World mine production of concentrate was 13.6 mt in January–September compared to 13.3 mt in the same period last year.

With increased mining output, Indian smelters would benefit this year as well, said Ramnath.