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Copper consumption to rise 15% on demand from auto, power sectors

Between 2000 and 2009, consumption of the red metal increased 9.7 per cent annually
India’s copper consumption is forecast to rise 15 per cent, the decade’s highest, on phenomenal growth in end-use sectors such as electricity, consumer electronics, industrial machinery, equipment and construction. The consumption growth is expected to de-accelerate in 2011 to eight per cent.

According to the latest report by credit rating agency Icra, copper use in the country is expected to grow to 650,000 tonnes by the end of the current calendar year as compared to 565,000 tonnes last year. Total copper consumption is estimated to rise to 720,000 tonnes in 2011.
Between 2000 and 2009, consumption of the red metal increased 9.7 per cent annually. By comparison, consumption declined 0.1 per cent in 2008. The slow growth in consumption was primarily because of limited domestic capacity and supply, high import duties on concentrate and finished products, inadequate investments in telecom and power infrastructure, and high prices.
Consumption growth was high till 2007, but declined in 2008 and 2009 because of a price rally and the slowdown in industrial production and construction activity. Even during the peak economic downturn of 2009, consumption rose 9.5 per cent to an estimated 564,000 tonnes, driven mainly by huge infrastructure spending and continuous growth in the manufacturing sector.
The annual per capita consumption of copper in India is 0.47 kg, which compares poorly with China’s 5.4 kg and the world average of 2.7 kg.
With stagnation in demand from the telecom sector, the electrical sector emerged as the largest consumer. The government initiatives (power board restructuring, the Electricity Act of 2003 and thrust on transmission and distribution) have created an environment where investments in the power sector will rise. Power generation capacity addition is expected at around 78,700 Mw during the 11th five-year Plan (2008-12).
Based on expected capacity expansions during the 11th Plan and associated investments in transmission and distribution, the Working Group on Power for the 11th Plan has estimated copper requirement at 0.8 million tonnes between 2008 and 2012 and 0.81 million tonnes between 2013 and 2017. Due to its high electrical conductivity, a prime application of copper is in wires and cables used to carry power and telecom signals.
The growth in copper consumption will be driven by high growth in the automotive sector. Both automobile and auto component manufacturing sectors are growing rapidly with orderbooks filled for the next two months. Hence, transport equipment and industrial equipment manufacturing sectors, which consume nearly 35 per cent of the country’s total copper output, are likely to drive demand of the red metal this year, says Navneet Damani, base metal analyst with commodity broking firm AnandRathi.
Additionally, the government has laid huge emphasis on the construction sector, with a number of low-cost housing projects being planned for this year. The central government, in association with the state governments, has also drawn plans for mega power plants in various parts of the country. These two sectors, which consume nearly 36 per cent copper output of the country, have been on a massive expansion spree for the next five years. Rapid growth in these sectors would drive copper consumption in the country, Damani said.
Following a 6.9 per cent decline in 2008, India’s refined copper production increased 7.8 per cent in 2009 to 721,000 tonnes. Production increased at a five-year compounded rate of 11.5 per cent.

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