“Our approach is very much in line with the government’s push on Atmanirbhar Bharat. I think as a country we have not fully leveraged the scale of our own domestic market to create a leadership position globally. For Copper, our focus is to ensure we develop the right quality products for India and then use that base for exports as well.” .
April 2022: In this engaging interaction with Manish Kulkarni (Co-founder & Director, Pro MFG Media), Rohit Pathak, CEO, Birla Copper (Hindalco Industries Ltd.) discusses wide-ranging topics from Birla Coppers’ smelting capabilities to the impact of Covid and from the key industry trends to aligning the industry with the Atmanirbhar Bharat campaign.
Birla Copper operates one of the largest single location custom copper smelters in the world. What kind of manufacturing capacities and capabilities do you have?
The Aditya Birla Group (ABG) is today a large MNC with a strong global footprint and from our founding days has always been a partner in the development journey of India. And hence across several key sectors we have gone ahead and built capacity to make India self-reliant. About 25 years ago, we set up a copper smelter at Dahej, just as India was embarking on a large electrification and urbanization program. This is a fully integrated copper smelter, where we have a smelting facility, a refinery, and the downstream rod making capability. Our capacity today is roughly 500+ KT, catering to over half of the domestic demand.
Unfortunately, India does not have large reserves of Copper Ore (Indian ore, which we buy almost fully, can suffice for less than 10% of domestic demand). Therefore our focus has been to ensure that even as we import the copper concentrate from regions which are rich in copper like South America, Australia, Canada and Indonesia, we develop the processing and the value adding capacity in India to ensure availability of this key metal domestically.
Copper is a complicated mineral and one of the toughest minerals to process. There are over 40 elements of the periodic table that come with the copper ore which we process. A copper smelting/refining plant is like a mini–Technology Park where you have multiple technologies brought together to ensure that we don’t just extract copper but also extract precious minerals and create value from the by-products.
For the mining & metals industry, 2021 will be remembered for two major themes. First, the resilient recovery from the Covid-19 pandemic that sent commodity prices rising to heights never seen before. Second, the ESG factor anchored itself in the mainstream focus for businesses. How has Birla Copper responded to these two themes?
Resilience against Covid: Covid was unchartered territory for all of us both at a personal level as well as at a professional level. When the first Covid wave hit, it brought everything to a standstill. But our philosophy has been very clear at Hindalco - Safety First. And hence, we took all the precautions to ensure that first our people at our units as well as their families are safe, and that we have robust protocols for a safe and stable restart. We ensured that all the protocols and the safety standards are maintained and very tightly governed through every phase of the pandemic. Secondly, we ensured that vaccination is done not just for our employees and their families, but also for all the contract employees. For our Fertilizers business, where the majority of our team is in the field across eight states, we ensured that even the families of our field agents are vaccinated on time. Thirdly, during the second wave, which was the severest for India, we repurposed our oxygen plant at the Dahej facility to supply oxygen for the State government for medical use. In fact, we were able to ramp it up within a week to a level where I think we were able to cater to almost the full requirement for Ahmedabad and Gandhinagar put together. This was an excellent effort by our team and we were glad that we could help the State and the people of India during this phase.
Supporting the downstream: Being the only operating copper smelter in the country, we understand the role we play in ensuring that the downstream industry does not suffer a supply disruption. Over the last couple of years with our proactive planning and efforts, we have been able to ensure that there is a consistent smooth supply of refined copper for all the downstream applications and that there is no disruption in the domestic market due to the global supply chain disruptions. And the last couple of years, with severe disruptions in global supply chains due to Covid and now the Russia-Ukraine conflict, we have been able to ensure uninterrupted refined copper supply in India.
ESG Factor: At the Aditya Birla Group, over the years we have led the way for the industry on environment, social responsibility and governance. At Hindalco, we have been diligently driving ESG as a priority well before the global push began in the last couple of years. Perhaps you may be aware that Hindalco is the top-ranking aluminium company when it comes to ESG on the Dow Jones Sustainability Index (DJSI), and we continue to consistently up our score on that index. There are two specific areas that I would like to highlight for Birla Copper. One, we are ensuring that all the waste that is generated at our plants is reused to the maximum extent possible. To that end, we are working with several industries such as UltraTech Cement and Grasim to repurpose some of our waste streams for value-added products. Secondly, we are quite consciously working on increasing renewables as an energy source for our units. At the Dahej facility, we are just embarking on a 20 MW solar plus wind project to cater to 15-20% of our requirement. Along with GIDC, we are also partnering on a desalination plant for our water requirement for Dahej to reduce the freshwater utilization by over 50%. Overall, we are making steady progress on ESG. Well, the journey is long but we are on it firmly.
Which are the key sectors driving the business growth for Birla Copper?
Copper is one of the oldest metals known to mankind, and we have been using it for over 10,000 years. India or Bharat, as it was called then, was one of the pioneers in the use of copper for various applications. There are basically three core properties that copper provides: high electrical conductivity, good thermal conductivity and strong anti-microbial efficacy. For example, most of us in India still store water at home in copper utensils due to its anti-microbial properties. In fact, we have been exploring several nanocopper based products such as masks, textiles and films for surfaces to enhance their efficacy against viruses.
Of course, in India as is the case globally, the primary application of copper is basically around the housing wires & cables, winding wires for motors, and automotive wiring harnesses.
Four Key Trends: From a growth angle, I see four mega trends, which will shape the demand in the coming decade. The first key trend is urbanisation. India is urbanising at a very rapid pace and we will continue to see large-scale requirements and demand for housing wires and associated cables. The second key trend is digital. As we move to a digital economy, copper will continue to remain the preferred conductor in various applications such as PCBs, chips and internal connectors for digital devices. The third trend is the growth of renewables, especially solar, that use a fair bit of copper. And the fourth trend –it’s just starting but it will be very, very large – is e-mobility. And this is not just the batteries but also the storage and charging infrastructure that will be required for enabling e-mobility.
I see these four mega trends coupled with a few downstream applications to lead to a 5x growth in Indian Copper demand over the next two to three decades. And we, as Hindalco, are gearing up to ensure that we enable and participate in this 5x growth, including developing the downstream products that will be required in India.
Considering its usefulness for making a vehicle as well as for the charging infrastructure, do you see the push for electric vehicles having a big impact on the copper industry? How well positioned is Birla Copper to leverage this trend?
Definitely! Copper will be key for the transition to e-mobility. On an average, the electric vehicle (EV) requires four times the copper as compared to a normal vehicle. So from approximately 25 kg per vehicle, we will need about 85 kg to 90 kg per vehicle for the EVs. Secondly, we will also see a large amount of copper being used for the charging infrastructure (charging network and charging stations) as well as battery storage. Globally we expect almost two million tonnes of incremental demand for Copper for e-mobility (to put it in a context, it is twice the entire Indian copper demand today).
In India, we are gearing up for supplying and servicing this need. As you know the government has recently announced a PLI scheme for battery cell manufacturing in the country, where copper will also be an important metal to be used. We are working with some of these players to see if we can do the domestic manufacturing of that copper foil in India. Today, a large part of this and the cell itself are being imported. But hopefully now with this PLI scheme and the rapid growth that we expect in this sector, there is an economic rationale for developing this capacity in the country and we will work towards the same. This will also pave the way for us to serve the global market for batteries, as we get economies of scale with the large Indian demand that is expected.
Of course, the EV technologies are evolving and which will be the final technology is still a question mark. But my take is that irrespective of what kind of batteries we have, it will still require copper and hence we need to gear up for the copper for these requirements.
Coming back to the electrical equipment segment, the traditional electric motors are the largest consumer of energy in any plant. Is Birla Copper geared up to meet the demands from the electric motor manufacturers to meet the quality as well as the efficiency standards?
Absolutely yes! We make the top grade of copper today. But we are continuing to work on further improving the quality as well as the conductivity so that we can enable our customers to provide the same performance with even lesser amount of Copper! We are working on developing new quality/performance grades for our customers to enhance the efficiency of their products. Even as we do that, a challenge that we are working on along with some of our customers is to raise the awareness of the importance of quality in the minds of the end consumers. Several players end up mixing high-quality refined copper with poor quality copper made from scrap (and not recycled with appropriate technology) to reduce the cost of the wires. While this does impact the performance of the wires, more importantly, this creates a fire safety risk for the consumer. Therefore, on the one hand we are working with BIS to develop proper standards for what gets used for various applications because it involves safety. On the other hand, we are working with several agencies to build consumer awareness on the issue. By the way, this does not imply that we should not use scrap. On the contrary, we believe that Recycling and developing a Circular Economy is going to be important for India given that we do not have enough copper ore in our country. However, how we recycle the copper waste is going to be critical and as we recycle, we need to ensure that the quality is restored for safe use in electrical applications by deploying the right processing technologies.
Tell us something about your role as the Senior Vice President at the Indian Electrical & Electronics Manufacturers’ Association (IEEMA) for the year 2021-2022. What is its significance in the context of the copper industry in India?
My role in IEEMA is an honour given to me by my fellow IEEMA members who elected me into the National Executive Committee and also as a Senior Vice President of the Association. My responsibility there is for IEEMA and the IEEMA members, and to ensure we develop the industry in India. I am not here for any personal or corporate agenda. India is poised for a very sharp growth in the electrical and electronics industry, especially given the mega trends that I spoke to you about a little while earlier – urbanisation, digitalisation, electrification (backed by clean, renewable energy) and e-mobility. A lot of new demand is going to come, both for the domestic market as well as for exports. I am trying my best to work with my colleagues at IEEMA to create awareness about the potential growth opportunities that the sector presents, and how our members gear up to take advantage of these growth opportunities.
Three Focus Areas: Our focus there is around three areas. One is supporting the government initiative on Atmanirbhar Bharat where we can encourage more and more manufacturing in India. Second is around developing quality products. We are trying to drive quality so that we are a good source for global exports. The third one is to see how some of our members can take advantage of the new opportunities that are coming up in areas such as renewables, e-mobility and storage, and even green hydrogen. Our aim is to enable our members to repurpose themselves towards these applications.
The Ministry of Commerce has recommended imposition of countervailing duty (CVD) on copper tubes and pipes from Vietnam, Thailand and Malaysia for five years to safeguard domestic players against imports subsidised by these countries. How do you view this development?
I think it is a very good and welcome step. If we talk about the copper value chain, in India we do not have enough copper ore and we end up importing copper ore. When we import copper ore, we end up paying import duty on that copper ore of 2.5% plus surcharge except from one or two countries which are under FTA. But for the large part, we end up paying an import duty of ~2.75% in total. Now, in the copper business, the conversion margin that we get for smelting and processing that copper ore is about 4% or 5%. So a 2.75% hit due to the duty on the margin is more than half the margin gone. On the other hand, many of the other countries like Malaysia and others get copper ore at zero duty, they process it, and then export to India at zero duty – this creates an inverted duty structure for Indian manufacturing. Hence, I think this is a very welcome step. We have been discussing with the government to make import of copper ore (in the form of copper concentrate) zero duty so that the value addition can be done fully in India. That’s one part of the equation.
Secondly, on each of these applications where a larger amount of import is happening, we are working as an industry and as a company (Hindalco) to develop these products in India. For example, under the PLI for ACs, we have signed up for the copper inner groove tubes to be made in India. The project execution has started and in a couple of years we will be ready with that product in India. Our approach is very much in line with the government’s push on Atmanirbhar Bharat. I think as a country we have not fully leveraged the scale of our own domestic market to create a leadership position globally. For Copper, our focus is to ensure we develop the right quality products for India and then use that base for exports as well. The government is aligned and proactively supporting the industry on this theme. We look forward to this playing out across several other downstream products for Copper going forward and will actively participate in that opportunity.