India faces a copper supply shock after a state government ordered billionaire Anil Agarwal’s Vedanta Ltd to shut down a plant permanently following deadly protests in a move that would slash nationwide output and stoke demand for imports.
The Tamil Nadu government directed the southern state’s pollution control board to seal the 400,000 tonnes per year smelter in Tuticorin in the interests of the people, it said on Monday.
About 13 people died at the site last week after police opened fire as locals protested against alleged pollution.
Photo: Reuters
The order to shut the smelter would reduce India’s production by about half, spurring imports as industrialization and increased consumption of cars and appliances fan demand.
Vedanta had suspended output from the plant in March for maintenance, and the closure was extended as the protests mounted.
The shutdown is an “unfortunate development” and Vedanta will study the order before deciding on a course of action, the company said.
“If the closure is permanent, then what we expected to happen two years down the line will happen with immediate effect,” ICRA Ltd senior vice president Jayanta Roy said.
The local arm of Moody’s Investors Service last month had pegged India to flip to becoming a net importer by the next fiscal year.
Vedanta shares lost as much as 6.2 percent to 237.90 rupees in Mumbai, the lowest since June. The stock has collapsed 24 percent this year, making it the worst performer among the top 10 metal companies in India.
A closure of the plant would shave about US$200 million to US$250 million from Vedanta’s annual pre-tax earnings, according to an estimate from S&P Global Ratings.
Copper is used to make pipes and wires, and the Australian government last year forecast that India would require vastly more of the metal to feed its economy by 2035. Prices on the London Metal Exchange have rallied 22 percent over the past year and were last at US$6,882 a tonne after paring an early drop.
India’s annual copper consumption is expected to almost triple to 2 million tonnes in the next decade, according to a projection from Hindalco Industries Ltd.
Vedanta produced about 48 percent of the nation’s total copper output of 842,961 tonnes in the last fiscal year, according to government data.
“So far our capacities were large enough for our total requirement, so we were a net exporter,” Roy said. “Now, with no new capacities coming in and if almost 40 percent goes out on top of that, we will be in a deficit.”
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