From Net Exporter To Importer: How India's Copper Woes Began And Kept On Growing

Niti Aayog member, V. K. Saraswat, recently said that India’s increasing dependence on copper exports was a worrisome trend. India, which was a net exporter of copper until a few years ago, has turned into a net importer of copper since 2018 after the closure of the Sterlite Copper Smelter in Thootukudi.

Unfortunately, the mainstream focus has always remained on fuel minerals, while the resource security of non-fuel minerals has been side-lined.

But, ignoring a problem does not solve it. With supply concerns and other constraints, copper price has already crossed the $ 10,000 mark, higher than the 2011 peak.

Several small-scale Indian industries have shut operations, citing the high prices and non-availability of metals. India’s dependence on imported copper has only added to our woes.

Doctor Copper

The importance of the base metal, in an industrial society, cannot be understated. In fact, the price of copper is often used as a heuristic to predict the future of the economy, giving it the name “Doctor Copper”.

The metal has the highest electrical and thermal conductivity in relation to other non-precious metals.

Copper has diverse uses as a critical metal across industries — household goods, infrastructure, electronics, capital goods, transmission and others. Therefore, usually, an increase in copper prices would usually mean higher demand due to good economic growth, and a decrease implies a potential recession.

A report by the Department of Science and Technology (DST) published in 2016, had listed copper as a mineral with high economic value, but with low supply-chain risk. Nevertheless, the shutdown of the 400,000-tonne per annum copper smelter has added to supply chain risks.

Copper Consumption is Likely to Increase

India has a per-capita consumption of copper that stands at 0.6 per kilogram. In contrast, countries like China and Russia consume 5.4 and 3.3 kilograms per capita.

The average per capita copper consumption of the developed nation is around 10 kg. Therefore, it is quite likely that the consumption would increase multi-fold as manufacturing and infrastructure develop.

Analysts already believe that copper shortfalls would increase as copper consumption is likely to outstrip supply in the coming years if mining capacities are not ramped up.

India has 2 per cent of world’s reserves but contributes to only around 0.2 per cent of copper mining. Yet, India previously contributed to 4 per cent of refined copper production.

Despite having negligible mining capacity, smelting allowed India to capture a larger part of the value chain. Custom smelting plants like Sterlite and Hindalco buy copper concentrate, refine it, and sell the finished products.

With the closure of Sterlite, India’s smelting capacity operates at around half of the nameplate capacity. As a result, India has lost its relevance in the global supply chains for important non-ferrous metals.

China was one of the largest consumers of India’s copper; however, India’s low production in recent years has allowed Pakistan to fill in the gap.

Why is Copper Security Critical for India?

The “criticality” of a mineral is a function of socio-economic structures and political priorities. For India, manufacturing, defence, infrastructure, and clean energy are high on the government’s agenda to propel India’s economy.

The government’s production-linked incentive (PLI) scheme, to encourage manufacturing, has attracted interest across several sectors from large business houses.

As these companies set up manufacturing units, the demand for metals like copper is likely to increase. The automotive sector, consumer durables, and process industries are the largest consumers of copper after the electricity sector.

The report by DST has highlighted the fact that as India’s income levels rise, India will move from low-technology, labour-intensive industries to medium and high-technology industries.

Such a shift would result in an increasing consumption of industrial minerals like steel, aluminium, copper, etc.

In addition, the government has also been pushing for infrastructure growth and electricity sector reforms. The electrical and telecommunication space consumes around 56 per cent of the copper produced, making copper a critical element for the development of the sector.

Further, India’s electricity grid would have to be upgraded as India shifts from conventional sources of energy to renewable sources, spurring the requirement for copper.

On the transportation infrastructure front, building the railway infrastructure would also require copper, with several high-speed train projects requiring almost 10 tonnes of copper per kilometre of the track.

The push for environmentally-safe electric vehicles and renewable energy add to the requirement of copper. A conventional car has around 9 to 22 kilograms of copper, whereas a hybrid electric vehicle has around 38 kilograms of the metal.

A battery electric vehicle goes much higher at 83 kilograms of copper. Though India is building an infrastructure to support EVs and solar/wind farms to create green energy, a shortage would mean increase in copper prices as a result of which India would not be able to reach its green energy goals.

In addition, solar power farms and wind turbines also use high copper quantities. As a rough rule of thumb, renewable energy sources require four to six times the amount of copper used by conventional sources.

For India, the simultaneous rise in the adoption of EVs and clean energy would also mean a decline in import bills for fuel minerals like crude oil and coal.

India’s fuel expenses have recently risen as both domestic demand, and global energy prices have shot up together. Therefore, ensuring copper security is instrumental in our aims of making the country Aatmanirbhar from the energy perspective.

Resource nationalism has risen as governments wish to get a larger share of the increases in mineral prices. While governments have been aiming for renegotiations of contracts in some countries, in others they have focused on all-out nationalisation or re-allotment of mines.

In addition, a dominant position in the mineral supply chain is often used as a leverage by countries. It is mandatory for India to enhance its copper mining, smelting, and value-added products segments, in order to fulfil its ambitions of becoming truly Aatmanirbhar.