| Date: |
24-07-2015 |
| Subject: |
Copper producers face risk of losing China market |
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Domestic copper producers, who have had to exit lucrative export markets in South East Asia and the West Asia in recent years due to lack of competitiveness, are now at risk of losing out in China too, which is the largest market for copper products from India.
Copper producers in private say that the removal of 2% duty incentive on the sales of refined copper exports starting April 1 will make copper exports uncompetitive as margins will shrink by 2 percentage points from 5.5% to 3.5%. Industry estimates suggest that earnings per tonne will also shrink as a result of the withdrawal of incentives to $565/tonne from $686.3/tonne.
The Foreign Trade Policy 2015-2020 earlier this year withdrew the 2% duty incentives available to producers of copper rods and cathodes. Apart from the withdrawal of duty incentive, the high cost of production, huge working capital requirements and rising competitive scenario are putting Indian copper exports at risk.
With copper prices sinking owing to concerns arising out of Greece and China, the problems faced by producers are set to get worse. The three major producers of refined copper products in the country are Hindalco, Vedanta and Hindustan Copper. The price of imported ore accounts for around 85% of cost of production of copper products, therefore leaving low margins for companies to operate under. The industry will lose close to R250 crore with the withdrawal of the incentives.
“It was a significant incentive that is gone away and the profit margins are very thin,” said a senior official of a copper company.
To make matters worse imports into India from free trade agreement (FTA) signatory countries like Japan are continuing to surge with a near 100% rise in imports from 86,000 tonne in 2012-13 to 166,000 tonne in 2014-15, eating into the market share of domestic players. Copper producers argue that the withdrawal of export incentives will not aid in pushing up exports.
The Indian Primary Copper Producers Association and Assocham have made various representations to the ministry of commerce for the reinstatement of the exports incentive under merchandise exports from India scheme (MEIS), with little luck so far. “In the absence of an export incentive, they (domestic companies) will be forced to withdraw from some markets. Coupled with increased imports and shrinking domestic markets, they will be forced to cut back on production,” said an Assocham letter to the commerce ministry dated May 13.
The Assocham letter adds that over the last three years Indian copper rod producers have lost markets in South East Asia and West Asia owing to weak infrastructure facilities and high freight charges in India.
The Indian refined copper exports to China for the financial year 2013-14 was Rs 11,200 crore, which rose marginally to Rs 11,338 crore in 2014-15. “The sudden withdrawal of incentive will hugely impact Indian refined copper export to China which does not augur well for India-China trade,” said one company official.
Source : financialexpress.com
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