Copper processors demand differential duty on pure metal

Secondary copper processors have demanded for a 10 per cent differential customs duty between the virgin metal and scrap to ensure availability of scrap to feed their units.

These processors, who depend solely on imports of metal scrap from developed nations, are facing closure as scrap collection is being neglected in many countries where the price of the pure metal is lower.

Currently, imports of virgin metal and scrap attract the same basic customs duty of 5 per cent, along with other duties such as countervailing duty (CVD) of 10 per cent over and above, twice the education cess of 2 per cent and 1 per cent each and special additional duty (SAD) of 4 per cent. Thus, the total duty on copper imports amounts to 21 per cent.

In global markets, copper price has declined to $3,150 a tonne, almost 200 per cent lower than its highest level of $8,800 eight months ago.

As there is a similar import duty on both virgin copper and scrap and as the former is cheaper, secondary copper producers are finding it difficult to pass on the conversion cost.

“In the current market scenario, where virgin copper is priced lower than the production cost of $3,500 a tonne, scrap recovery becomes uneconomical in developed countries. Therefore, Indian secondary processing units face huge scarcity for scrap availability,” said Ajit Advani, CEO of the International Copper Promotion Council (India), the Indian arm of the US-based copper promoting organisation International Copper Study Group (ICSG).

Scrap is available at between 92 and 96 per cent of virgin copper price, which if converted with a total melting loss of about 10 per cent and profit of even 5 per cent, the process becomes uneconomical.

But, levying 10 per cent differential may allow secondary processors to pass on the conversion loss of 10 per cent to consumers, said Surendra Mardia, president of BME.

Meanwhile, an estimate indicates 15,000 scrap processing units with an average monthly processing capacity of 100-300 tonnes, have been shut down due to several factors such as financial meltdown, poor domestic demand, unavailability of scrap and uneconomical conversion of secondary copper from scrap. The estimate further hints that about 150,000 jobs have been lost.

Another 2,000 medium and big units, with an average monthly processing capacity of 300-500 tonnes, are currently operating at half the capacity. As demand slump and lack of scrap availability stare them in the face, fear of closure is looming large. Another 150,000 jobs are at stake.

This situation can be salvaged by levying a differential duty of 10 per cent, said Rohit Shah, director of the Bombay Metal Exchange (BME) and owner of a medium-size secondary copper processing unit in Mumbai.