Gautam Adani flexes muscles in another new sector

Gautam Adani flexes muscles in another new sector – Nearly two years back, Ahmedabad-based Gautam Adani – Adani Group made its major foray into the cement sector by acquiring two Indian subsidiaries of Swiss cement giant Holcim – Ambuja Cements and ACC – for $10.5 billion. This historic deal put Adani as the second-largest player in India’s cement sector with Aditya Birla Group as its only competitor. After that Adani has been building his cement empire in a battle royale with Birla’s Ultratech cement.

Now, Adani is setting his sights on a new frontier: copper. Listed as a CMR that is important for India for achieving its RE objectives, copper is critical for applications in EVs and other low-carbon products. In January this year, Adani group’s Adani Enterprises initiated its copper refinery at Mundra, Gujarat with Kutch Copper venture the group’s debut on the metals business.

Kutch Copper is negotiating with Australia’s BHP to source up to 1.6 Mtpa of copper concentrate for which supply deal can be estimated around ₹ 30,000 crore annually, based on market prices. To this date, neither parties, BHP and Kutch Copper, have released any statement regarding these discussions.

Owing to the expected increased copper demand by India in connection with its renewable energy plan, Adani definitely wants to establish large position in this segment. The Kutch Copper refinery is operating a refined copper that will have the capability of producing 1 million tonnes per annum in two phases with a target of 0.5 million tonnes of completion in the near future. The existing facility will be expanded to absorb an output of 1,450 kVAs by 2029 and make Kutch Copper the largest single-location custom smelter in the world.

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This step is in sync with Adani’s long-term strategy of building itself as one of the major players in the copper universe where the group already has expertise in commodities trading, logistic, renewable energy and infrastructure development. Though, fresh entrant in the copper sector, he will be competing with market Giants such as the Aditya Birla Group’s Hindalco and the state owned Hindustan Copper.

The current conditions of copper industry in India have experienced dynamism in the past years. From being a net exporter of refined copper the country has become net importer since fiscal 2018 because of shut down of Vedanta’s Sterlite copper plant in Tamil Nadu because of pollution issues. The shutting down of Tuticorin removed more than 46% of India’s copper production capability, provoking a surge in imports, which are expected to total ₹14,000 crore in 2022-23.

The growth rate of domestic production has been 9.6% CAGR before the year 2018 but the industry has fail to bounce back and there has been a constant increase in import figure Copper ore and concentrate have imported from the other countries by different industries and companies. Therefore, the current estimated is that per capita usage of copper in India is an of 0.6 kg, while the world per capita usage is 3.2 kg. The drive towards renewable energy as well as electric vehicles is projected to double domestic demand for copper by 2030.

Newer statistics show that copper consumption increased by 16 percent to reach 1,520,000 tonnes In 2023 from public and private investments constructed on sectors such as construction and transportation. Copper consumption in transportation has risen by 34% in the last 1-2 decades via electrification and modernization.

The refinery of the Kutch Copper is forecast to bring India’s a refined copper production to the levels seen in 2017 and is expected to achieve a target of 800000 tones by 2025. It is expected that this rise in production is going to closely follow the rise in domestic consumption.

At the same time, the global copper demand continues to increase due to the shift in energy systems around the world. China alone, for instance, is currently undergoing rapid growth of its copper industry that is disrupting the international value chains. With new Chinese smelter increasing production the copper market will likely undergo tremendous changes that may affect global pricing as well as availability of copper.

While entering this new segment, Adani’s proper approach towards the copper sector could indeed help him dominate India’s demand while gearing up the Adani Group for global copper manufacturering.