In the wake of China-led slowdown hurting the markets around the world which has led to calls in India for taking this crisis situation as an opportunity for the global economy may need an alternative growth engine. It is now the ideal time for the country to emerge as the factory of the world and renew confidence among potential investors that it is indeed a viable investment destination.
To sustain this optimism, industrial and economic progress has to be maintained and sustained. The consumption pattern of the industrial metals including copper, is the yardstick to gauge this growth phase. As India marches ahead, the copper industry will continue to make headway with increased usages. The government goal to provide power to all by 2019 and housing by 2022, modernization of the railways, the incentives and encouragement accorded to the building & construction sector, the proposed 100 smart cities and the industrial freight corridors will lend a tremendous boost to the copper industry.
However, the sector is saddled with many challenges. Among the biggest challenges faced by domestic suppliers includes the Trade Agreements / FTAs, which are allowing cheaper imports into the country and have been detrimental to the domestic industry as a result of which we have seen rising imports as well as falling realisations. Secondary industry segments like tube manufacturers have been closing their manufacturing facilities as they become unviable vis -a -vis imports and in turn reducing the domestic manufacturing output.
Statutory laws and regulations have not been industry friendly which lead to high spending on logistics as well as making imports attractive. Export incentives have been withdrawn from 1st April 2015, which has also been a setback in pursuing exports. Falling exports are increasing the trade gap with China.
We expect this situation to be corrected in the near future as globally the investment in new copper mine development has been significantly reduced to match the slowdown in demand. This will result in lower production growth during coming years which will re-balance the supply-demand situation. Due to weak prices for around two years now, the investment in new mining projects have waned considerably. This is expected to push the copper market back to deficit over the next 2-3 years thereby boosting prices.
To mitigate the woes of the industry, the stakeholders must work with government agencies to have a level playing field, revisit all the FTAs on an urgent basis which has not been supportive to the domestic copper industry, build new capability within the country and improve the quality of products. These forward looking measures will help in curbing imports into the domestic market. Besides, the government must clamp down on cheap and inferior quality products and impose safeguard duty as low producing countries like China, Japan and South Korea have an edge over Indian copper producers.
In keeping with the expectations, the government is showing a sense of purpose in understanding the issues and challenges. It has drawn a road map with a sharp focus on infrastructure and manufacturing. With foreign investors’ bullishness on the economy and confidence level rising, it’s an opportune time for India to grab the opportunity to race to the top.