The planned start-up of billionaire Gautam Adani's copper factory in India next year will result in a dramatic increase in concentrate imports, further constricting the global supply of ore on which smelters rely. The Kutch Copper Ltd. facility, with an initial capacity of 500,000 tonnes per year, is set to open in March, increasing the country's potential metal production by 80%. Its launch will coincide with a sharp decline in ore availability due to the closure of a large mine in Panama and drastic cuts at Anglo American Plc operations.

India has joined China and other countries in quickly increasing its capacity to produce copper, a metal believed critical to the world's shift away from fossil fuels. The fast increase is harming profitability: annual rates charged by Chinese smelters will fall for the first time in three years in 2024, as capacity outpaces ore supply.

According to Soni Kumari, commodity strategist at ANZ Banking Group, India's copper concentrate imports might reach 2 million tonnes in 2024, up from 1.3 million tonnes this year. The market will be considerably tighter in 2025, she predicts, "due to expanding smelting capacity in China and India."

More than 90% of India's mineral requirements are imported, primarily from South America. Adani's development coincides with legal attempts to restart a long-closed 400,000-ton mill managed by Vedanta Ltd in Tamil Nadu. Hindalco Industries Ltd. now operates the country's largest copper smelter, which has a capacity of 500,000 tonnes.

World's Copper Supply Appears to be Running Low as the Glut Fades

According to Jayanta Roy, senior vice president of ICRA Ltd, a subsidiary of Moody's Investors Service, the Adani smelter might absorb up to 1 million tonnes of international copper concentrate in its first year of operation. According to him, assuming full capacity utilization, India's total imports might grow to 2.6 million tonnes.According to ANZ's Kumari, Adani's new smelter should return the country's refined copper production to 2017 levels of around 800,000 tonnes by 2025. "We expect the increasing refined production will be largely absorbed by strong domestic demand," she went on to say.

Demand is projected to rise further as the new smelter's capacity is set to be doubled. According to ICRA, India's refined copper consumption is predicted to expand at a fairly healthy 11% in both this fiscal year and the next, which finishes in March, due to the government's infrastructure investment and the country's progressive move to renewable energy.

The closure of the Vedanta smelter in 2018 significantly cut ore inputs, putting India into a net importer of refined metal after local production fell by nearly half. The deficit has remained. According to the International Copper Association India, output was only 563,000 tonnes in the year to March 2023, compared to demand of 1.5 million tonnes.