After cement, Adani is building muscle in another new sector

Two years ago, Gautam Adani’s Adani Group, which has a significant presence in the ports, airports and energy sectors, ventured into another infrastructure sector, cement, by taking a bold move by acquiring Ambuja Cements and ACC from Swiss giant Holcim for $10.5 billion. The largest cement deal in India has made Adani the second largest cement player in India after Aditya Birla Group. Since then, Adani has bought a few more cement plants to expand its business in a race with Birla’s Ultratech.

Now, Adani is flexing its muscles in another new sector, copper, which is crucial to the growth of renewable energy in India since it is widely used in electric vehicles and has been declared an essential mineral. In March this year, Adani Enterprises commissioned the first unit of its copper refinery at Mundra in Gujarat, marking its debut in the metals sector through its subsidiary Kutch Copper.

Kutch Copper is now in talks with Australian mining conglomerate BHP to source up to 1.6 million tonnes per annum (mtpa) of copper concentrate, people with knowledge of the matter told ET. The supply contract is expected to be worth around 30,000 crore annually at current price levels, which are subject to fluctuations, ET reported. Neither BHP nor Kutch Copper responded to ET’s queries.

As India’s need for copper will increase significantly with the surge in renewable energy, Adani is looking to have a strong presence in this sector.

Adani’s copper coin
Kutch Copper, a subsidiary of group flagship Adani Enterprises Ltd, is setting up a copper refinery for the production of refined copper with a capacity of 1 million tonnes per annum in two phases. The $1.2 billion facility aims to produce 0.5 million tonnes of copper in the first phase. It will reach its full capacity of 1 million tonnes by March 2029. At 1 mtpa, Kutch Copper will be the largest single-form smelter in the world.

Kutch Copper will help Adani Group’s ambitious green energy business. Adani aims to become a global leader in the copper sector, leveraging the Adani Group’s strong position in resources trading, logistics, renewable energy and infrastructure. Adani’s move will pit it against Aditya Birla Group’s Hindalco, which is India’s largest copper producer, and government-owned Hindustan Copper.

The copper problem in India
Copper is one of the 30 critical minerals identified by the Center. Per capita copper consumption in India is estimated at around 0.6 kg, compared to the global average of 3.2 kg. India’s efforts towards clean energy systems, growing penetration of electric vehicles and a host of associated applications are expected to double domestic copper demand by 2030. Not long ago, the India was a net exporter of refined copper. This changed with the closure of Vedanta’s Sterlite copper plant in Tuticorin, Tamil Nadu, in 2018 after violent protests against pollution allegedly caused by the smelter unit. India became a net importer of copper for the first time in 18 years in 2018-19, as the closure of Vedanta’s Sterlite plant wiped out more than 46% of domestic production of the base metal, according to a report from research. As a result, imports of refined copper have soared to Rs 14,000 crore in 2022-23, according to experts.

Domestic production of refined copper grew at a compound annual growth rate (CAGR) of 9.6% between 2013-14 and 2017-18, according to a Care Ratings research report. But with the closure of Sterlite’s copper plant in Tuticorin, production fell by 46% during 2018-19, with Sterlite accounting for 40% of the country’s copper smelting capacity. After the closure of the Sterlite plant, the country’s imports of copper ore or concentrate also declined by around 45%. Indian companies use imported ore or concentrates to produce refined copper. India spent Rs 27,131 crore on copper imports in 2022-23, compared to Rs 21,985 crore a year earlier, according to the government.

Copper demand in India jumped 16 percent to 15.22 lakh tonnes in 2023 from 13.11 lakh tonnes in 2022, according to a study by the International Copper Association India (ICA India). This growth is based on a solid foundation of policy reforms, public and private investments and consumer spending in various end-use sectors such as building construction, renewable energy, electric mobility, industry, roads railway and metros, electricity transport and distribution and the white sector. goods. Copper demand has registered double-digit growth for consecutive years after a contraction in FY21 due to the COVID-19 pandemic. One of the key drivers of this growth is the transportation sector, including automobiles, railways and metros, which has seen a 34% increase in copper demand. This can be attributed to the electrification and modernization of railways, the addition of rapid transit, and a 21% growth in automobile sales, including the increasing adoption of electric vehicles (EVs). In the construction sector, an 11% growth in copper demand can be attributed to increased copper usage per square foot, especially in high-end, high- and middle-income homes.

India’s copper production has been unable to meet this demand, and disruptions to domestic supplies have led to increased reliance on imported copper. Indian imports have increased steadily over the past five years.

Adani’s new smelter is expected to return domestic refined copper production to 2017 levels of around 800,000 tonnes by 2025, Soni Kumari, commodities strategist at ANZ Banking Group, told Bloomberg. “We expect the increase in refined production to be largely absorbed by strong domestic demand,” she added.

The China factor
The Adani plant will come at a time when global demand for copper is increasing due to its use in the energy transition. Growth in copper demand amid the shift away from fossil fuels to renewable energy sources is expected to be pronounced in the United States, China and Europe, besides India.

China is in the midst of a meteoric expansion of its copper industry that is reshaping global flows of the metal critical to the global energy transition, according to a Bloomberg report. Chinese copper smelters could put pressure on their global counterparts in the coming years by “paying” for the raw material they need, an expert told Bloomberg. The closure of old smelters in the rest of the world could be the consequence. The expansion of China’s smelting capacity echoes the history of other Chinese metallurgical industries. Until 2006, for example, the country was a net importer of steel. But a wave of new capacity ultimately led to an influx of exports.

(With contribution from agencies)