By Reuters
Friday December 7, 02:15 PM
By Biman Mukherji
NEW DELHI (Reuters) - Burdened by rolling blackouts and industrial power shortages, India is bent on expanding its power capacity, potentially boosting copper demand sharply and reviving global interest in the metal.
Because of India's roaring economy, India's power production needs to rise by 15 to 20 percent annually, and with it, lots of copper consumed to meet the demands of its billion-plus populace.
If the projects take off as planned, India will likely have less copper to export, which could ease worries that copper demand will slump if the U.S. economy continues to falter.
"We could turn into a net importer of copper, provided all these power projects come on stream," Hitesh Aggarwal, vice president of research at Angel Broking.
Copper has fallen 20 percent since October to $6,755 a tonne on a dimming demand outlook.
"The need for more power has sunk into everybody's head," said Gnanasekhar Thiagarajan, director of Commtrendz Risk Management. "We suspect that many Indian players would start making bulk purchases of copper now as prices are low."
Because of the new building in plants and other infrastructure, India's annual copper demand is expected to more than double to nearly 1.5 million tonnes by 2012, from 600,000 tonnes now.
The country's production is estimated at 700,000 tonnes and India usually exports between 100,000 tonnes and 150,000 tonnes a year.
"For every addition of 1000 megawatts, there will be new demand of 10,000 to 15,000 tonnes of copper," said a senior Mumbai-based analyst, who did not want to be identified.
"We know of at least three power projects coming up now which will consume an additional 50,000 tonnes of copper," he said.
Domestic copper producers, including Sterlite, Birla Copper and Hindustan Copper are able to meet domestic demand now, and are able to even export small quantities.
"We don't see the situation changing for at least two years," said the Mumbai-based metals analyst. "That is because many of the projects are still in the initial stages."
"The picture could well change once the new power projects
come on board."
Private and state-run power firms are planning capacity expansions of nearly 60 percent over the next several years, which will not completely solve the ongoing shortages.
"We would need to raise capacity by at least this much, if not more, to even maintain the present level of shortages," said Harry Dhaul, director general of Independent Power Producers Association of India.
India needs to invest $1.25 trillion by 2030 into its energy infrastructure, according to the International Energy Agency.
The country's energy shortfall touched 9 percent last year and at peak times the gap between demand and supply is nearly 14 percent.
More than 412 million people in India have no access to electricity and some villages only get a few hours a day.
GAPING SHORTAGES
India plans to finalise four more of its "ultra-mega power projects," each capable of generating 4,000 megawatts, by March 2009, more than the electricity consumed by teeming New Delhi.
The projects, which are to be located in states such as Gujarat, Madhya Pradesh and Andhra Pradesh. The country has already allotted two such projects to private bidders so far this year.
"If the power sector takes off, then copper demand will also take off," said Sunil More, director general of the Indian Electrical and Electronics Manufacturers Association.
"There is a new seriousness in expanding power capacity as compared to 10 years ago," More said.
To be sure, despite the number of power projects planned over the next four to five years, the percentage of copper consumed is unlikely to go up proportionally as in other countries because of the traditional preference for aluminium in busbars, the flat strips or tubes used in electrical power distribution.
Indians have favoured the use of aluminium over copper in certain applications because it is cheaper, albeit weaker conductor, said Ajit Advani, chief executive officer of International Copper Promotion Council's India office.
He said that though aluminium was cheaper to buy upfront, copper was more economical if the entire life of many products were considered.
"As energy conservation and the environment become more central to our decisions, our per-capita copper consumption would increase," he said.
But Advani said he even expected an increase in the use of copper plumbing in India because of greater durability and better hygiene.
India's per-capita copper consumption is slightly over half a kilogram per person, compared with 3.5 kilograms in China and 12 kilograms in developed countries.
CUO
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