Vedanta’s Sterlite Copper Plant In Southern India Runs Into Trouble

Copper premiums in Asia rose earlier this week after last week's port strike in top copper-producing country Chile, and a force majeure event called by India’s largest copper smelter run by Sterlite Industries.

According to reports, copper premiums in Singapore climbed to their highest levels since May 2012. Premiums are what consumers pay up and above the London Metal Exchange (LME) cash prices.

Premiums for Grade A copper warrants in Singapore warehouses CU-GDA-SG were quoted at US $50 to $65 from $30 to $40 in the last week of March, according to traders. On April 4,LME copper prices had touched an eight-month low, dipping below US $7,350 a ton.

To add to the port strike, India’s largest smelter, run by Sterlite, announced it was halting deliveries after it was forced to shut down due to complaints of “gas leaks.”

The impact of the second event is going to be huge on India’s – as well as Asia’s – copper supply. Sterlite produces over 300,000 tons of copper per year, which is about 50 percent of India’s total supply. Clients are somehow getting their supply of copper, but many fear it may taper off very soon.

All eyes are on how the Sterlite Industries story unfolds. The company exercised force majeure on purchases of copper concentrates and deliveries of different kinds of copper. Force majeure is a clause in the supply contract that allows a company to miss shipments “due to circumstances beyond its control.”

The smelter, located in the coastal town of Tuticorin on the southern tip of India, was ordered to be shut by the Tamil Nadu State Pollution Control Board (TNSPCB), after the latter had detected higher than normal levels of sulphur dioxide in the area. Sterlite, which is a unit of London-listed conglomerate Vedanta Resources PLC, denied “allegations of leakage,” saying all emissions were within stipulated limits.

Even before it was commissioned in 1997, Sterlite has been at the epicentre of a protracted battle with local politicians and protestors who want the copper smelter out of their state. On April 6, this group observed a one-day general strike in the town of Tuticorin.

by Sohrab Darabshaw