Sterlite Industries (India) Limited - Sterlite Industries India Ltd.

Indian Copper Market
Background
The Indian copper industry consists primarily of custom smelters as there are limited copper deposits in the country. The available deposits
are owned by the government-owned Hindustan Copper, which was the only producer in India until 1995. Since then, the industry has
transformed significantly with our entry and the entry of Birla Copper, now owned by Hindalco. Hindalco had a primary market share by
production volume of 48.0% and we had a primary market share by production volume of 45.7% in fiscal 2009 according to the International
Copper Promotion Council, India, or ICPCI, with the remainder of the primary copper market served by Hindustan Copper (5.8%) and SWIL
Limited (0.6%). Primary copper refining output in India has grown at a compound annual growth rate of 11.0% from 499,000 tons in 2005 to
683,000 tons in 2008.
Consumption Pattern
From 2005 to 2008, consumption in the Indian primary copper market increased at a compound annual growth rate of 14.3%. The
consumption by the electronics and power segments witnessed growth at a compound annual growth rate of 3.3% during fiscal years 2002 to
2008. The total domestic demand for primary copper is estimated to have increased from 415,000 tons in 2005 to 598,000 tons in 2008, a
compound annual growth rate of 12.9% over three years. In addition, the demand for copper in India is expected to grow from 598,000 tons in
2008 to 1.2 million tons in 2020, representing a compound annual growth rate of 5.8%. This compares to world demand for copper, which
Brook Hunt estimates will grow from 18.0 million tons in 2008 to 24.7 million tons in 2020, representing a compound annual growth rate of
2.7%, according to Brook Hunt.
Pricing and Tariff
Indian copper prices track global prices as the metal is priced on the basis of landed costs of imported metal. Copper imports in India are
currently subject to a customs duty of 5.0% and an additional surcharge of 3.0% of the customs duty. The customs duty has been reduced in a
series of steps from 25.0% in 2003 to 5.0% in January 2007. Indian producers are also able to charge a regional premium, which is market
driven.
Market Outlook
Global Copper Outlook
The rapidly developing Asian market is expected to drive copper consumption growth. The countries from Asia that are contributing to this
rapid growth are primarily China and India. Copper demand is expected to continue to be dominated by its use in electric wires and cables.
Global refined consumption of copper is expected to decrease from approximately 18.0 million tons in 2008 to 17.4 million tons in 2009, a
decrease of 3.2%.
Anticipated mine production capacity expansions are barely sufficient to match the forecast smelter production and the world is expected to
remain in a copper concentrate supply deficit for 2009. China is rapidly expanding its copper smelting and refining capacities. However, its
domestic mining supplies fall well short of its smelter demands and thus China will continue to remain a major importer of copper concentrate.
Apart from China, major smelting and refining capacity expansions are expected in India, Zambia, Kazakhstan, Congo DR, Brazil, Malaysia
and Bulgaria.
To meet the forecast copper demand, copper smelting capacity is expected to grow until 2013. The major projects expected to contribute to
copper smelting capacity include Olympic Dam (Australia), Ventanas (Chile), Oyu Tolgoi (Mongolia), Chagres Expansion (Chile) and El
Sewedy (Egypt).
The catalyst for any meaningful recovery in long-term TcRcs will be a rationalization, or at least restructuring, of the custom smelting
industry. Until then, TcRcs are likely to remain well below their previous long-term average.
Indian Copper Outlook
The Indian market outlook is expected to remain positive, with strong growth in key user segments such as power, construction and
engineering. Domestic consumption is expected to marginally decrease by 2% from 2008 to 2009 and then increase by 4.5% from
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