Indian Copper Industry February 2018

Transcription

1 Indian Copper Industry February 2018 Introduction Copper is the oldest known metal to man. It is an essential non ferrous metal and an excellent conductor of heat and electricity as well as being corrosion resistant and antimicrobial Today, copper's uses have expanded to include various industrial uses such as heating, cooling and refrigeration, electrical wiring, electronics, power generation and transmission, automotive applications, antimicrobial uses and many more. Copper is found in ore deposits around the world. India has limited copper ore reserves as compared with the global markets. It constitutes to about 0.2% of the World Copper Reserves. Global Copper mines reserves by country as of 2016 Copper manufacturing process Copper ore contains less than 1% copper and hence must go through several physical and chemical processes to become market ready. The following are the processes. Mining Copper ore is extracted using two basic methods of mining - open pit or underground mining. Concentration Smelting and Extraction Refining Copper is concentrated by slurrying the water and chemical reagents and removed from the skimmer. Copper concentrations are between 24-40% typically. Smelting for sulfide ore concentrate and solvent extraction for oxide ore leach solution. Copper from the smelter is melted and cast as anodes, the solution from the solvent extraction process moves to a plating operation. Sulphide Ore Refining Final use The final step in processing sulfide ore copper from the smelter is to make high purity copper cathodes. The copper cathodes now contain 99.99% copper The finished copper cathode can be made into wires, plates, tubes, and other copper products. Downstream sector of copper includes value added products such as sheets, strip, foil, wire rod, wire etc

2 Industry Segmentation Industry segmentation Miners Custom Smelters (Smelting & Refinging) Integrated producers Secondary producers Xstrata, Rio Tinto,Escondido & Codelco in Chile, Grasberg in Indonesia, Anta Mina in Peru Guixi & Yunxan in China, Hindalco & Vedanta in India Hindustan Copper in India, Codelco in China Many regional players manufacturing copper by recylcing copper scrap End use segment Electrical Household & Others Wires/Cabl es End-use segment Refrigeration Aircondition ing compressors Automobile

3 World mine production over the years While there has been a steady rise in the world mine production since 2013, the first 10 months of 2017, indicate a decline by 2.6% in production, based on the data provided by The International Copper Study Group (ICSG) due to decline in production of Chile. Source: Source: ICSG ICSG World copper refined production (Primary & Secondary) (000 MT) In 2015, China accounted for over a third of world copper refined production, followed by Chile (12%), Japan (6%) and the United States (5%). Global refined copper production is growing at a CAGR of 3.65% from CY 2012 to CY World Copper Production (primary and secondary) in the first quarter of CY 2017 (January- March), is recorded at MT which is more than 0.22% q-o-q of CY2016. Total reserves in India As of , total reserves are estimated (in metal terms) at 4.8 million tonnes and probable resources at 12.3 million tones. The copper reserves and resources are largely located in three copper belts, namely, Khetri copper belt in Western India, Singhbhum copper belt in Eastern India and Malanjkhand copper belt in Central India. All the operating mining leases are presently held by HCL, a state owned copper producing company. To increase production, HCL has chalked out an expansion plan to increase mine production from 3.2 million tonne per annum to 12.4 million tonnes per annum by In FY , Mine ore production of HCL, (the only copper mining company in the country) was 3.85 million tonnes as compared to 3.9 million tonnes in In metal terms the production was 30,587 MT as compared to 31,578 MT in

4 Mine production in India over the years India s mine production dropped sharply in FY due to - A steep fall in the LME Copper Prices (LME Copper was 7104 USD/MT for the FY where as it was 6554 USD/MT for the FY recording a 8% fall in prices). - And 21% fall in the Malanjkand mine which contributes to about 65% of the copper ore production. India s copper mines are mainly concentrated in the states of Rajasthan, Madhya Pradesh, Bihar and Jharkhand. Largest resources of copper ore are in the state of Rajasthan. Hindustan Copper Limited (HCL) holds all the operating copper mining leases in India, making it the sole copper miner in India. Source; HCL Balancesheet Domestic refined copper production During FY , refined Source: Care Ratings copper usage (including cathode and wirerod) was around MT, up from MT in FY The production has grown at a CAGR of 6%. Copper consumption growth rate is likely to increase around 6 to 7% due to improvement in growth rate of manufacturing, housing & infrastructure sectors. Electrical & power sectors account for nearly one-third (35%) of the refined copper consumption, followed by 11% by the transport (Auto and Railways) industry, 8% each by construction & consumer durables industry. The growing environment consciousness and emphasis on using more energy-efficient appliances would also help to protect demand for copper in India. India is self sufficient in refined copper production and has emerged as net exporter of refined copper. Import & Export: As of now, there is a high level of deficit in the mining capacity and surplus in the refining capacity. Domestic production of concentrate accounts for only 4% of the total requirement. Consequently, India imported around 2,748,933 tonnes of copper concentrate (about 824,000

5 tonnes of metal) in FY However, India is self sufficient in refined copper production and has emerged as net exporter of refined copper. India majorly exports to China, Singapore, Taiwan, Malaysia, South Korea, Oman, Indonesia and Saudi Arabia. During FY China imported 88% of India s refined copper exports vis-à-vis to now China only imports 37% of India s refined copper exports for the FY There is, also a cross trading in the import / export of refined copper, and during the FY , around 350,000 tonnes of refined copper was exported as compared to 335,000 tonnes in International and Domestic Copper Prices Source: CARE Ratings, LME Prices of copper in India have moved in tandem with global prices. The same is fixed on the basis of prices of LME Copper and USD/INR rates. It is also influenced by the economic growth of major copper consuming countries such as China, US, Japan and Germany. As indicated above the copper prices declined from due to slowdown in the Chinese economy. However the same has recovered in driven by stimulus measures taken by the Chinese government. Outlook India's copper market is expected to remain positive with strong growth in key user segments such as power, construction and engineering. Copper demand is expected to grow at the rate of 6 to 7 % in coming years due to improved economic activity in the country. Such high demand is a result of increasing urbanization, development of industrial corridors, smart city project, housing for all by 2022, National highway development project, Rail project, Defense production policy to encourage indigenous manufacture, India energy plan GW solar, 32GW wind, 260GW thermal & nuclear, 62 GW hydro. In addition to this there is plan for green energy corridor for transmission of renewable energy. The per capita copper consumption in India is expected to increase from the current level of 0.5 Kg to 1 kg by The per capita copper consumption of China is 6 Kg and world average is 2.7 kg. Import of finished copper is increasing over the years. Free trade agreements with copper producing countries have posed a challenge to the Indian copper industry. In coming

6 days, the industry needs to be innovative on product and cost to meet the forthcoming challenges.

7 Challenges faced by major players and our offerings The increasing demand and fast pace growth poses copper players with a number of challenges Increasing Costs: The external environment is volatile. Market prices keep fluctuating. In such a scenario cost optimisation techniques help you identify scope for reducing costs and bring about stability in operating profitability. Our solution: NMS brings with itself a rich experience of over 65 years in costing. Our services support you to identify your key cost drivers, and provide strategic options to control costs. We also provide capacity assessment which helps you to identify bottlenecks and scope for enhancement. NMS s wide range of offerings in this segment include - Costing templates - Benchmarking - Capacity assessment - Strategic offerings - Action plans Information Management: Information management is critical for any company s sustainable growth and profitability. Real time information is required on performance metrics, financial ratios profit and loss summaries across all departments, products and geographies. The right information at the right time is what allows agile, strategic decision-making, accurate forecasting, and management control of processes and supply chains. Our Solution: NMS provides a complete, integrated set of solutions that provide information that is accurate, complete, and timely. It helps connecting and automating the entire flow of business processes across both front and back office operations and throughout geographies, so the business runs at peak efficiency, worldwide. We provide - Information system assessment - ERP Evaluation & ERP Implementation Support Human Resource management: Growing business needs require efficient and skilled manpower. Besides an efficient human resource system in any organisation facilitates employee development and motivation which in turn helps in achieving organisational goals. Our solution: NMS offers a diverse range of cost effective and result oriented services for your human resource systems. Our services help your organisation s manpower to be ever ready to perform optimally in a fast changing environment. We offer the following services - Process study/set up/enhancement - Designing and implementation of training methodologies - Facilitating employee engagement programs Managing energy cost: Energy management is critical for players in this industry. It is necessary to identify and control areas to minimize your energy

8 consumption to improve overall sustainability and competitiveness of your plant. Our solution: Our solution helps you to identify and control areas to improve energy efficiency and business performance. Our services include - Energy Evaluation - Energy measurement analysis - Action plan Meeting government compliances: The policy and regulatory framework on the Indian Copper Industry entails a number of statutory compliance requirements. Our Solution: Our compliance management arm, assists you to meet your government and process compliances with ease. We also offer GST Compliance Management & ASP. Rating Advisory: A credit rating from an external credit rating agency is mandatory for availing bank debt. Besides, a fair rating can help you reduce your cost of borrowings. Our Solution: At NMS we offer you a one stop solution for helping you carry out the rating process. Our services - Showcases the company s business to the rating agency in the right perspective - Guide you possible rating implications in case of any corporate actions such as Capex plans, growth plans and their funding pattern - Irons out any data asymmetry and communication gap between the your company and rating agency. - Releases your company of valuable bandwidth by providing a dedicated rating desk to meet all its rating requirements Source Hindustan Copper Ltd Balance sheet CARE Ratings ICSG Statista.com