NEW DELHI (Reuters) - India’s decision to shut down Vedanta Resources’ VED.L biggest copper smelter over environment concerns has hit 350 companies that buy its products and led to over 3,000 layoffs, a top company executive said.
The Tamil Nadu state government ordered a permanent closure of the plant in May following protests over alleged environmental violations that turned violent and culminated in the police opening fire on protesters, killing 13 of them.
The smelter, located in the port city of Thoothukudi in south India, is operated by Sterlite Copper, a unit of London-listed Vedanta controlled by Anil Agarwal.
Residents and activists say the smelter is polluting their air and water.
Sterlite Chief Executive P. Ramnath said the shutdown, which the company has challenged in court, has led to a shortage of copper and scores of companies in and around Tamil Nadu that depended on supplies, are folding up or scaling back operations.
“Some of them have shut down – Coimbatore motor manufacturers have shut down, some tube manufacturers have shut down,” Ramnath told Reuters in an interview, without naming any of the companies. Coimbatore is an industrial centre in Tamil Nadu state.
A top state government official did not immediately respond to an email seeking comment.
D Jayakumar, a state minister who has previously spoken on behalf of the government, did not respond to calls seeking comment. Jayakumar told Reuters last month that the closure would not impact investments.
Vedanta says the Thoothukudi smelter, which has a capacity of 400,000 tonnes, accounted for 36 percent of India’s demand and directly employed around 5,000 people. The company planned to retain all the employees on its rolls as it fights for lifting of the ban on operations.
But the company has had to let go over 3,000 people who were on contract, Ramnath said. He said the shutdown was forced on the company without proper procedures.
A top district official told Reuters last month after a reported acid leak that the state government was taking all precautions to ensure safety.
Vedanta is importing copper cathodes and supplying it to some domestic consumers to maintain its relationship with some customers, Ramnath said.
The copper crisis in India comes at a time when globally, copper prices have fallen due to stability in production despite disruptions all over the world.
Three-month copper on the LME CMCU3 has fallen by over 13 percent since the beginning of the year over fears of a trade war between the United States and China.
All contracts to import copper ore are on hold due to the shutdown, said Ramnath, adding that BHP Billiton Ltd (BHP.AX) and Freeport Mcmoran (FCX.N) are among its major suppliers. BHP and Freeport declined to comment.
“All contracts related to supply of copper concentrate are on force majeure. Most of the copper suppliers are in Chile, Indonesia and Australia,” Ramnath said.
Reporting by Sudarshan Varadhan and Sanjeev Miglani; Additional reporting by Susan Taylor in Toronto and Melanie Burton in Melbourne; Editing by Alexandra Hudson