Shutdown of plant to shoot up copper prices in long term, cause price hikes in range of products
India consumes 1.5 million tonnes of copper annually, half of which has been produced by Sterlite copper plant’s owner Vedanta and Hindalco Industries, a unit of the Aditya Birla group.
With shortage in domestic copper supply, Indian electrical goods manufacturers will have to rely more on imported copper and are bracing for a rise in costs, after the government in Tamil Nadu ordered the permanent shutdown of Vedanta’s Sterlite copper plant in Thoothukudi.
Why is this important
With permanent shutdown of Sterlite plant:
- International copper prices may increase 5-15 rupees per kg, further driven by strong demand and a weak rupee
- Higher expensive copper imports likely to lead to an increase in prices of a wide range of products from power cables to electronic appliances, and televisions to auto parts, as manufacturers look to pass on the cost increases.
Impact on stocks
Indian electrical goods manufacturers will have to import copper via spot deals due to the sudden turn of events at Vedanta leading to higher input costs at a time when a weaker rupee and a surge in crude oil prices have put pressure on profit margins. Although, manufacturers intend to pass on the cost increases to consumers, it may be done at a lag impacting their stock negatively over short term.
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