Sterlite’s closure scalds downstream industries

Fertilizer manufacturers and other downstream industries that source their raw materials including sulphuric acid and phosphoric acid from Vedanta Ltd’s copper smelter – Sterlite Copper in Thoothukudi – claim they are in choppy waters following the closure of the unit.

Representatives of companies who are dependent on Sterlite Copper for acids, fly ash and copper slag said that this would soon impact battery manufacturers, detergent makers, cement plants and the abrasive industry, among others. A few firms have already halted their production even as they scout for a new source of raw material.

For instance, Coimbatore Pioneer Fertilizers Ltd, which manufactures single superphosphate (SSP), has seen its production go down post the closure of the Sterlite plant. SSP is widely used in the cultivation of pulses, oilseeds, vegetables and cotton, and in coconut and banana plantations.

S. Velumani, executive director of Coimbatore Pioneer Fertilizers Ltd, which supplies nearly half of the requirement of SSP in Tamil Nadu, said that the two major raw materials required for manufacturing SSP were sulphuric acid and rock phosphate. “All these years Sterlite Copper was supplying us our entire requirement of sulphuric acid. Due to the sudden closure of their plant, production of SSP at our factory has suffered,” he said. He added, “There are a few other small manufacturers of sulphuric acid in our region. Since they mostly use the acid for their captive use, it is not possible for us to procure from them.”

Price shoots up

R. Harihara Gopalan, executive director of Annam Chemicals Private Ltd, pointed out that the price of sulphuric acid had increased 3.5 times after Sterlite was forced to down its shutters.

Analysts who track the chemical industry said the price of sulphuric acid, which was around Rs. 4,000/mt in March 2018, touched Rs. 14,000/mt in June this year.

Three manufacturers (dependent on sulphuric acid from Sterlite) said that they had stopped production. One of them, headquartered in Tamil Nadu, said that many firms had only limited capacity at their premises to store sulphuric acid. “We generally join hands with other firms who need the same raw material and get one shipment. Now, we are facing challenges when we want to go to a new supplier.”

Fertilizer manufacturers are also operating below their normal capacity due to restricted availability of phosphoric acid both in the domestic and international markets. The Managing Director of a fertilizer firm in Maharashtra said that the resources were limited. “Phosphoric acid prices change once in three months and we will know the impact in July. Domestic phosphoric acid scarcity will lead to increase in imports, which will lead to higher prices,” he said.

Mr. Harihara Gopalan explained that phosphoric acid was also essential for the animal feed industry.

The price of gypsum, used in the cement and fertilizer industry, has also increased from Rs. 250/mt to Rs. 450/mt effective June 2. A Hyderabad-based firm which used to source gypsum from Thoothukudi said import of the commodity would increase going forward depriving the Indian market of employment and leading to foreign exchange loss.

The chief project manager of another company at Thoothukudi, who did not want to be named, said that the entire abrasive industry in Tuticorin (dependent completely on V-Sand) had been affected, impacting about five units, employing close to 500 people directly. “Copper slag availability will soon become a challenge,” he said. Copper Slag/V-Sand is an eco-friendly construction raw material which is being increasingly used in the place of river sand.