India’s untapped pool of copper

Akshara (0:04)

In today's episode, we'll do one deep dive and cover another story for the day. First, we'll talk about India's untapped pool of copper, and then we'll talk about why Indian industry is still betting on coal. Welcome back to The Daily Brief by Zeerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Friday, 18th September.

Before we begin, the NSC IPO is now open until September 21st. To understand how the business works and whether you should subscribe, do check out our breakdown on NSC's DRHB from a few months ago. Coming to the first story.

So when an old building is demolished, the electrical wiring usually doesn't go with the rubble. The copper inside those cables could be old, but still worth something. So an electrician or contractor pulls the cables out, a local scrap buyer purchases them, someone strips away the plastic insulation, and the bare metal is weighed, sorted, and sold.

That copper, in turn, can be melted down and turned into fresh wire, rod, or other copper products. Unlike oil, which disappears the moment you burn it, copper doesn't get consumed when you use it. It stays inside the product, whether that's a cable, a motor, or a transformer.

Now, India has an enormous amount of this non-virgin copper sitting inside products. As of FY21, the country had approximately 15 million tons of copper actively in use, embedded in power grids, vehicles, ACs, computers, and telecom cables. So India's copper demand in FY25 was about 1.88 million tons, up 9.3% from FY24. And of this, secondary copper accounted for 42% up from 38% the previous year. Now that stock estimate has almost certainly grown since FY21, with roughly 1.1 million tons being added annually. So in a world where copper prices are only increasing and India imports over 90% of its concentrate requirements, this secondary copper can provide a much needed cushion for our costs, even if it can't ever fully replace primary copper. Now we know that copper demand is increasing due to electrification, grid expansion, renewables, EVs, construction and data infrastructure. New mines take a decade or more to develop. India produces very little copper ore domestically, and demand is projected to grow to roughly 3-3.3 million tons by 2030 and 8.9-9.8 million tons by 2047 For a more comprehensive dive on how the copper cycle works, we recommend watching our subtext episode with Amit Kumar Gupta.

Naturally, this makes the copper already above ground inside components and infrastructure look attractive. For instance, a power cable installed in a building this year might work perfectly well for decades. Building and infrastructure copper can remain in service for 30-50 years, while consumer goods and vehicles typically turn over in 15-20 years. But naturally, you can't extract copper while the thing it's embedded inside is still in use. So how much can you recycle out of this reservoir of copper every year?

For comparison, only about 380 kilotons or KT of end-of-life copper became available for recycling in FY21. Today's booming installations of solar farms, EV motors and grid cables add to the reservoir immediately, and they won't add to scrap supply for decades. When copper does reach the end of its useful life in India, there's an entire ecosystem to find it. When someone replaces an AC, for instance, a kabaddiwala or garbage collector typically shows up and pays cash for it. That material passes through neighborhood scrap shops, then larger aggregators to specialist dismantlers before the copper inside it eventually reaches a processor or remelter. Now, the chain can involve 4 or 5 intermediaries, but material rarely sits unclaimed at each link for long. And this, as you might know, is still quite an informal sector. But large institutional scrap works on a different, more formal model. So factories, railways, and power utilities auction off obsolete equipment through tenders. In fact, Indian railways regularly auctions condemned locomotives and rolling stock through its IR EPS platform, and individual lots can contain several tons of recoverable copper. Now, how much of this collection really matters? The numbers on this are quite conflicting.

One industry estimate puts the end-of-life copper recycling rate at 95% to 99%, attributing it to high collection efficiency. But that number diverges sharply from a 2020 government framework that puts the copper recycling rate at just 20%.

This gap could be enormous partly because the two numbers are likely not measuring the same thing. So the ICA figure counts what happens to copper that reaches end-of-life. How much of it gets collected and reused in any form?

The government figure likely measures something different. Perhaps, recycled copper as a share of total demand, or copper processed through formal channels. But the framework doesn't define its methodology clearly enough to save a certain. But what both numbers more or less agree on is that collection is not India's main problem. Now, copper scrap is not one uniform material. A stripped copper wire from a demolished building is almost pure metal. An electric motor is enameled copper windings trapped inside a steel casing. A transformer contains windings, steel cores, and insulating oil. A printed circuit board has copper traces dispersed among plastics, solder, and small quantities of gold, silver, and palladium. These are called copper scrap, but they require completely different processing. And international scrap specifications reflect this difficulty.