About 60 mid-size copper smelters are waiting for the red metal market to stabilise to reopen their units, which have been closed for two years now. The smelting capacity of these units, which are spread across the country, varies between 100 and 200 tonnes a month.
Two factors had led to the shutdown of these secondary units in early 2006, when the prices on the London Metal Exchange had touched $5,000 a tonne.
Firstly, the Ministry of Environment had imposed an unwarranted restriction on imports of copper scrap, which was confined only to user industries. This meant that scrap importers and traders went out of business as they were not allowed to import scrap and sell it to domestic smelters.
With supply crunch in scrap, domestic prices started hitting the roof. The ministry made it mandatory that all consignment of scrap imports should obtain clearance certificates from the ministry.
Secondly, actual scrap users — the companies — started reducing the quantity of imports so as to only feed their smelters as scrap processing had become unviable. Thus, these units shut shop and drifted to more profitable business.
Last month, the government removed the ban on small traders and importers to ship in copper scrap. Heaving a sigh of relief, secondary copper smelters can now think of opening their units. Hundreds of scrap traders in Kika Street, the famous copper trading market in Mumbai, are jubilant now. They say consignments will begin arriving by at least December.
“The import consignment will start hitting Indian ports within two months from now, as a number of scrap dealers have already floated orders for immediate execution,” said an official with Parekh Metal. However, Surendra Mardia, president of the Bombay Metal Exchange (BME) said that closed smelters may wait till price stabilises in the overseas market to open the units.
Copper prices are volatile now, with variations of 15-20 per cent occurring in a day.
Unavailability of scrap has kept smelters on a tight rope as used copper is quoted at Rs 5 a kg higher than the virgin metal. Copper cathode in spot market is currently sold at Rs 230 a kg against the used copper or scrap (armiture) at Rs 235 a kg.
According to Mardia, virgin or primary metal price should be quoted at least Rs 20 higher than armiture. Anyway, secondary copper processing units are operating with 3-4 per cent margin. But, once the virgin metal price stabilises in global markets, domestic scrap market will follow.
This means that either virgin metal price would have to appreciate or scrap price should depreciate for these closed units to commence their operations, said Mardia.
Meanwhile, Rohit Shah, former president of BME, maintains that copper importers are caught in a dilemma. Those who booked the metal at $6,000 a month-or-two ago are not claiming goods at the port as the metal price has fallen dramatically to $3,900. Importers are incurring losses of over Rs 26 lakh for each container of copper cathode imports. A container contains 25 tonnes of copper.
Restrictions resulted in a dramatic fall of copper waste and scrap imports to 29.33 million tonnes in 2007-08 as compared to 35 million tonnes in 2006-07.
