Copper is the New Gold ?!

How a Small Fishing Town in Tamil Nadu decided the fate of India's Copper Industry

13 People died protesting against Sterlite Copper’s (Vedanta owned) plant in Thoothukudi, TN

Since it began operating in 1996, Sterlite Copper has been pulled up multiple times Tamil Nadu Pollution Control Board (TNCPB) for polluting Groundwater and dumping toxic waste but each time was allowed to continue operating with nothing more than a ‘slap on the wrist’

Not only did the company continue to operate without making major changes, but it decided to double its capacity from 400,000 Tons to 800,000 Tons/year.

That’s when the good people of Kumarettiyapuram village (200 m from the proposed expansion plant) decided they had had enough.

13 dead protesters later, by May 2018, TNCPB and the State Government finally ordered the plant to be shut down permanently.

And with that, ~ 36% of India’s refined copper capacity went offline.

And because Copper refining (and mining - Monopoly) is an oligopoly, with only 3 major players, Sterlite’s capacity going offline meant India has had to increasingly rely on Imported Refined Copper.

Supply disruption coupled with Increased demand (check sources of demand below)

is leading to higher trending imports. Costing the exchequer ~ 27,000 Cr per annum (FY23) and growing.

An increase in demand and a supply glut are leading to rising copper prices, not only in India but across the world :

Interestingly, to counter the growing imports of refined copper, none other than Gautam Bhai Adani (surprise surprise !) has set up a plant (Kutch Copper Ltd) with 500,000 Tons per year, which commenced production just last week.

That’s all nice! But what’s the point?

The larger point I’m getting to is this :

1. Copper is Key to the World’s Energy Transition Goals and there seems to be a demand-supply mismatch in the World (not just in India) which is leading to higher prices

2. Is there a possibility of profiting from this increased demand and constrained supply?

3. What can we learn if we further Analyse companies further up and down the Copper Value chain?

I’d like to hear your opinion in the comments because where I stand, there are 2 possible directions this research could go in :

Look Forward to hearing your thoughts

Rahul

Disclaimer

Nothing you read here should be construed as investment advice. I do not know your circumstance so please treat the above as nothing more than my personal opinion, which is subject to change without prior notice to you. Please do your work and consult your financial advisor. I may own positions in all stocks, sectors and indices discussed and can exit them without notice.