The Third Indian Metals conference organised by the Metal Bulletin in Mumbai on November 23 and 25, discussed the future development of base metals in India in the global perspective. Today, the growth and expansion in Indian base metals industry particularly aluminium, copper, zinc is of interest to global investors.
At present, the largest interest centres round copper with three new greenfield ventures coming on stream, adding over 250,000 tonnes of copper smelting and refining capacity. Birla Coppers 100,000 tonnes refinery is expected to be commissioned next month, three months ahead of the start up of the 150,000 smelter. It was explained that as a sound management decision the company started its 80,000 tonnes copper rod plant six months ago and was now ready with the starting of the refinery well ahead of the smelter.
This would avoid any hitches in smooth working of the whole complex for when the smelter starts the other facilities should be ready to receive the hot metal and process it further and convert it into saleable product. The company would first import blister copper to refine it but when the smelter is ready there would be no need for such imports.
The assembled delegates had pointed out that stabilisation of smelter operations all over the world takes time and they appreciated the way Birla Copper was going about it to minimise any dislocations. SWIL representatives said that their 50,000 tonnes smelter will start trial production in April 1997 and commercial production in middle of 1998. However, the delegates pointed out that they will be using copper scrap and residues in their smelter which carry a duty of 30 per cent against a duty of 5 per cent on concentrates, which their competitors would be using in their smelting. However, SWIL was quite confident that despite the duty handicap they will be able to work well at a profit as they have captive consumption of their copper in downstream value added products. Sterlite representatives stated that their smelter was now working smoothly despite two closures and they maintained they had foreign experts to overcome any technical problems that may arise. Sterlite stated they were now taking steps to increase the capacity of their smelter from 100,000 to 150,000 tonnes and as a first step had ordered a second oxygen plant. The increased capacity could be in operation within the next 12 months.
Rajat Kohli, of Paribas, UK spoke on Financing the Development Of the Indian Metals Industry. He sounded a warning saying, Asiaa economic outlook is uncertain, commodity prices are being revised downwards, the Indian currency is overdue a correction, funding sources for large scale projects are selective, and the barriers to entry in this sector are often higher than considered.
He said that given the sluggish performance of the Indian economy over the last 18 months and equally torpor ridden outlook for the next 12 months Paribas had revised downwards the consumption of metals in India. He said the growth rate for aluminium has been revised downwards from 8 to 7.2 per cent, for copper from 8.8 to 7 per cent, Zinc from 6.5 to 6.4 per cent, lead from 6.4 to 6.1 per cent and nickel from 11.4 per cent to 9.6 per cent.
He said the over valued rupee and fiscal deficit are clouding the economic outlook and corrective measures will have to be taken to restore growth. The largest level of investments, he said were in the aluminium field as India has very good bauxite deposits and the present capacity was 670,000 tonnes to which another 161,000 tonnes would be added which would take the capacity to 831,000 tonnes. Two new greenfield smelters are being talked of with a capacity of 500,000 tonnes. There is also talk of greenfield alumina refineries.
There is a new focus on copper and downstream projects and there is also likely to be an increase in primary and secondary zinc projects apart from modernisation of secondary plants . In ferro alloys, Kohli felt that it was a stop start business, although potential exists to use the manganese and chrome ore in more fruitful ways. The key issue was financing the next generation projects which may require an investment of $7 billion. These projects are in definite or possible categories. And the investment would be in the period between 1998 to 2002. Assuming a debt equity ratio of 2:1, debt component would be $4.65 billion and equity $2.35 billion. These kind of resources may not be easy to come by and may put severe stress on the promoting companies.
Therefore the world over, he said, brownfield projects are preferred over greenfield ones. He said that does not mean greenfield ventures are doomed in India but extreme caution would be needed in funding them.
Incidentally, he said that there was much euphoria a few years ago for greenfield steel projects but most of them were now in a financial bind which was not thought of while these projects were conceived. --- Gilbert Lobo
