Financial Express
17 August 2005

Birla Copper, the copper division of Hindalco Industries, has concluded the ambitious expansion of its copper smelter at Dahej in the Bharuch district of Gujarat. Birla Copper enjoys a leadership position in India and is among the fastest-growing copper businesses in the world. The outcome of the expansion is the doubling of the copper smelter capacity to 5 lakh tonnes per annum. The copper smelter at Dahej is now the world's largest smelter at a single location. Commissioning trials are under way and commercial production is likely to start in a short time.

The focus of the expansion was on attaining global cost competitiveness and the company has invested close to Rs. 1200 crore on this project. The increase in the smelter capacity from 1,00,000 tpa in 1998 to 5,00,000 tpa, when fully ramped up — a five-fold leap — is a commendable feat. Mitsubishi Materials Corporation, a Japanese company, has been the technological supplier for the company's latest expansion project.

In a letter to shareholders of the company, Mr. Kumar Mangalam Birla, Chairman, Aditya Birla Group wrote, "Doubling the copper smelter capacity from 250,000 tpa to 500,000 tpa catapults your company's plant to become the world's largest single location world-scale copper smelter. Importantly, it brings us closer to our goal of being among the "top 15 per cent" global, cost efficient copper makers. It also enables us to sweat our assets optimally, enabling us to leverage the Dahej jetty and infrastructural facilities to the maximum."

Speaking to Financial Express, D Bhattacharya, managing director of Hindalco Industries said, "Towards attaining global competitiveness and to reap benefits of significant deficit in the Asian markets, the company has pursued expansion of copper smelter to 5 lakh tpa. The project implementation has completed and is ahead of planned timelines. On successful stabilisation of the expanded smelter, the company will be amongst the top 10 global producers of copper and will also be the largest custom smelter in a single location anywhere in the world. More importantly, it will also enable the company to fully exploit the infrastructure potential at Dahej."

The copper smelter also has technology support from Outokumpu in Finland and Ausmelt in Australia. It had expanded to 2.5 lakh tpa in February 2003 and subsequent doubling of capacity was completed in July 2005. The copper complex in Dahej has adopted the best available technology for all its operations to help preserve the environment.

The company's copper product range includes copper cathodes and continuous cast copper rods. It also produces precious metals, sulphuric acid, phosphoric acid, di-ammonium phospate (DAP) and other phosphotic fertilisers. The company is ISO 9001,14001 and OSHAS 18001 certified and registered on the London Metal Exchange as a Grade A copper brand.

Birla Copper plans on strengthening its presence in exports while retaining its leadership in the domestic market. Capitalising on its coastal advantages and captive jetty, it intends entrenching further into the profitable markets of South East Asia and the Middle East. The huge demand-supply gap in the region, as well as improved availability of low cost metal from the expanded capacity, will be exploited optimally.

Birla Copper's revenues climbed 33 per cent to Rs 42.71 billion during 2004-05. Due to the company's increasing penetration into high deficit south east Asia and far eastern markets, total exports grew 16 per cent to 1.12 lakh mt. Birla Copper owns two copper mines in Australia — Nifty in western Australia and Mount Gordon in Queensland. Mount Gordon produced copper concentrate meeting 12 per cent of Birla Copper's requirement in fiscal 2005. Nifty and Mt. Gordon mines will eventually contribute 20 per cent of the copper concentrate requirement at Dahej. Global copper consumption in 2005 is estimated to grow at a moderate 2.4 per cent after a growth of 8.8 per cent in 2004.

Birla Copper is well-poised to make a bigger impact, on the global as well domestic scene. The global copper industry witnessed a demand growth of over 8.5 per cent in 2004, the strongest since the 1980s. The growth was backed by rising consumption from China and better industrial production in the US, Europe and the Asian region. Led by China, Asia may witness the strongest growth in copper consumption even in 2005. Demand from China is slated to grow in double digits during 2005 mainly due to the need for large investments in the country's power sector.

The sector, estimated to account for half of China's total copper demand, is still underinvested and the Chinese government's growth plans for the sector will ensure continued strong demand for copper. Demand from the rest of Asia also remained firm in 2004 with the region emerging as a hub for consumer durables and electronic components (key copper consumers). Consumption in 2005 is likely to slow down as exports of these products fall. As a result experts feel that overall Asian demand growth too may slow down to 5-6 per cent for 2005 from 10 per cent in 2004. Production in the region too has been growing steadily with a growth of 10 per cent during 2004. With supplies still lagging demand and lack of additional smelting capacities in the region, experts forecast a deficit of around 2-2.5 million tonnes in the Asian region. This provides an enormous opportunity to Indian producers for tapping the export potential in the coming years, given the locational advantage they command over the western producers.

Closer to home, the domestic demand outlook remains stable. Jelly filled telecom cables (JFTC), the largest copper consuming segment, is likely to witness steady growth, after having recovered from a sharp fall in recent years. Coupled with continuing strong growth in other key user segments such as winding wires, power cables and the transfer sector, domestic demand is expected to grow by around 4-5 per cent annually over the next few years.

The outlook for domestic copper producers remains optimistic given widening demand-supply gap in Asia, which provides an opportunity for direct exports. Deemed exports should also rise on the back of better outlook for downstream product exports and strong competitive advantage enjoyed by the producers in India.

The company's road map for the future involves exploring further acquisitions and leveraging upon both greenfield and brownfield opportunities