India An emerging copper consumer to support global copper demand?

Transcription

1 Mr. J C Laddha Hindalco Industries Limited, Unit- Birla Copper, India Speech Title: India An emerging copper consumer to support global copper demand? 1

2 Index Slide No. Topic 3 6 Advantage India and Govt. Initiatives 7 9 Copper Industry Snapshot & Growth Driver Power & Telecom Sector Industry Challenges 15 Value Drivers Hindalco Experience 2

3 Population (Billion) 60. 0% 50. 0% 40. 0% 30. 0% 20. 0% 10. 0% 0.0 % Advantage India Favorable working population ratio (15 64 yrs) India s Pace of Urbanization 51.0% 1.4 % % 28.6% 27.3% 31.7% 30.0% 31.7% Year E 2050E Rural Urban Urban (%) Source: NCAER, RBI, ENAM Research Source United Nations Population Division (2010) Vibrant democracy with stable political environment, robust Judiciary & financial institutions Young country - median age 30 years by 2025 Working age population - 58% in 2001 to 64% by 2021 Low cost labour force - nearly 530 million Urban population to grow from 30% in 2015 to 51% by 2050 Middle class population 256 m in 2015 to 586 m by growth of 129% 3

4 Government Initiatives To Boost Indian Economy High level focus to build best in class manufacturing infrastructure & focus on different sectors * New Process * New Infrastructure * Focus on New Sectors New Process Focus on Ease of doing business Focus on de-licensing and deregulation measures to increase speed and transparency. New Infrastructure Digital India: High level focus on Digital infrastructure, Digital Services & Digital Literacy Smart City Concept: USD 1.2 trillion investment in next 20 years & become world s 3 rd largest construction market by 2020 Industrial & Freight Corridors: Suburban corridors, High speed train projects, Dedicated freight lines etc. 100% FDI is permitted. Focus on New Sectors 25 sectors identified - Major sectors to impact copper growth are Automobile, Defense, Construction, Railways, Power etc Manufacturing sector investment - USD 1 trillion by Source Indian govt. Data Make in India 4

5 India Emerging Growth Engine for World Economy India to grow at GDP of 7.5 8% in next three years. (World Bank). Become fastest large economy with 9-10% growth over the next years (Morgan Stanley). Rank amongst world s top three growth economies & amongst top three manufacturing destinations by ( Ranked No.1 investment destination in world as per the 2015 Baseline Profitability Index (BPI). 7 th most valued nation brand (Brand Finance) Climbed up by 12 ranks to attain the 130 th rank in Ease of Doing Business ranking. (World Bank). Major reforms will bring India in top 50 within 03 years. (Department of Industrial Policy and Promotion - GOI) No.1 FDI destination in H1 CY Capital inflow of US$31 bn. GDP (Industry) to grow from 18% in 2015 to 25-30% by ( Indian GDP to grow 44% by 2020,highest among the BRICS Source: IMF estimates as of October

6 Copper Consumption Growth Drivers India Growth Drivers CAGR of per capita consumption from 2014 to 2019 (WoodMac/IMF) India 4.7% China 2.5% USA 1.9% World 1.9% Agriculture Industry Construction Services Overall GDP Fy'13 Fy'14 Fy'15 LE Fy'16 (Proj) Ref: City Research Feb 15 Per capita consumption forecast CAGR -4.7% ( ). Historically refined Copper consumption growth remained above the GDP growth by ~1%. Major growth drivers - Industry & Construction sector. Expected to be 6 th largest Cu market by India has huge growth potential in Copper consumption for next years 6

7 Copper Industry Snapshot % of world s mine production 82% of world s copper Consumption Over 56% of the mine supply is from America whereas over 65% consumption is in Asia Over 48% of world refined copper production is in Asia. Latin America North America Copper Concentrate Sourcing - India Africa Oceania Russia & Caspian Mine Refining Consumption Europe Other Asia China Almost 97% of the Copper Concentrate is imported by Indian smelters. Almost no copper reserves in India. Canada 5% Peru 10% Brazil 6% Indonesia 11% Chile 40% Australia 6% 7 Source: Wood Mackenzie

8 Copper Industry Snapshot - India * # * # KT Year Indian Smelters are running at ~74% of their capacities which is at same level as of world capacity utilization. Over 50% of the total refined copper production is being exported. Most of the imports are in semis due to capacity constraints. Indian smelters are expanding to take advantage from strong growth expected. Source: Wood Mac * / Hindalco # 8

9 Sector wise Refined Copper Consumption - India 12% 19% Electrical & Telecommunication Engineering Goods World 30% 8% 16% 7% 7% 6% India 56% 11% Consumer Durable Construction Transport 28% Others More than 55% consumption - Electrical & Telecom sector. Going forward, consumption pattern in India likely to converge in to the world pattern. Source: Indian Bureau of Mines 9

10 Power Sector - India Capacity (GW) Auxiliary Power Equipment segment Copper Consumption (KT) Capacity 2015 Additional Capacity Expected Capacity 2022 Wires and cables Transformes Motor Systems 3 rd largest producer of electricity in the world. Increasing market penetration & improved percapita usage are the drivers. Out of 278 GW additional capacity expected till 2022, 50% is in renewable sector. Additional capacity expansion will consume ~ 700 KT of copper. Expected Copper Consumption in cable and other power equipment segments between : Wires & Cables to grow at CAGR of 9% Transformers to grow at CAGR of 7% Motor System to grow at CAGR of 8% Source: IBEF & ICA 10

11 Telecom & Consumer Goods Sector - India Phone/Internet Users CAGR - 8.7% CAGR 12.1% White Goods Market Penetration India vs World 85% 89% 70% 60% 60% 21% 9% 3% Washing Machine Air Conditioners Refrigerators Televisions Mobile Users Internet Users India World Source: FICCI Particular CAGR Projected Volume ( ) ( ) Wasing Maching 9% 35 million Air Conditioner 13% 35 million Refrigerator 10% 75 million Television 20% 120 million Source: CRISIL/Hindalco 2 nd largest telecom market (over 1000million subscribers) with Tele density of 79.5 in FY15. 3 rd highest number of internet users in world & expected growth CAGR 12.1% ( ) Additional capacity expansion will consume ~ 170 KT of copper 11

12 Indian Refined Copper Industry - Challenges Resource Securitization Mining operations are very unpredictable & Situation is aggravated by export restriction in some countries Falling concentrate grades Decline in grade has inflated processing cost High Impurity levels Impurity content in the concentrate is putting operational/ environmental challenges for smelters. Higher Cost of Capital Higher Working Capital Substitution High interest rate and borrowing cost. From the source of raw material to sale of final product, the average cycle is about 100 days, which make the business highly working capital intensive. Copper has a threat of substitution with other cost effective materials including secondary copper Environmental concerns Demands to meet changing and stricter environmental standards for Metal Industry. 12

13 Source: Wood Mackenzie Risk of Substitution 13

14 SWOT Indian Copper Industry - Primary producers having integrated facilities - Industry presence in growing domestic market - Value addition from fertilizer as by product - Stable government & industry friendly policy - Make in India campaign support - Availability of skilled & low cost manpower - No major copper reserves in India -Downstream industry has poor financial strength to invest in R&D - Limited domestic sulphuric acid market S O Copper Smelters W T - High growth Asian market - Low per capita consumption in India - Capturing greater part of value chain (mining) - Infrastructure & transportation growth in India - Value added downstream products market growth - Poor availability of good quality concentrate - New capacity in neighbouring countries - Global surplus capacity - Fast increasing finished goods imports - Unpredictable commodity price & Market 14

15 Custom Smelter Value Chain Hindalco Experience Captive Jetty INPUT Copper concentrate Smelting Copper Anode Refining Copper Cathode Hot Rolling Copper Rod Market Market Market Sulfuric Acid Anode Slime INPUT Rock Phosphate Phosphoric Acid Plant Precious Metal Refinery Selenium, Bismuth and PGM INPUT Ammonia Di-Ammonia Phosphate Gold Silver Market Complex value chain with by products contributing up to 30% 15

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