Gautam Adani’s Rs 100-billion (USD 1.2-billion) copper smelter in Gujarat is operating far below capacity as a global supply squeeze restricts the flow of raw material. Kutch Copper Ltd., which began operations in June after several delays, has received less than a tenth of the ore required to run its 500,000-tonne-a-year plant at full strength.

Customs data show the company imported about 147,000 tonnes of copper concentrate in the ten months to October. By comparison, competitor Hindalco Industries imported a little over 1 million tonnes during the same period, according to Bloomberg data. The smelter needs around 1.6 million tonnes of concentrate annually to operate at full capacity.

Questions sent to the Adani Group did not receive a response.

Global supply constraints have mounted due to mine disruptions at major producers including Freeport-McMoRan, Hudbay Minerals, Ivanhoe Mines and Chile’s state-owned giant Codelco. At the same time, China’s rapid expansion of smelting capacity has eroded global profit margins, forcing some producers outside China to reduce output or shut down.

Treatment and refining charges — the fees miners pay smelters — have fallen to record lows this year, signalling that smelters are accepting extremely tight margins to secure material. For new entrants such as Kutch Copper, which plans to double capacity to 1 million tonnes within four years, the supply crunch means higher operating costs and a longer ramp-up period.

“Adani’s smelter is new and so should be more efficient than many competitors, so in the short term it could ramp up at a loss,” said Grant Sporre, analyst at Bloomberg Intelligence, adding that India may raise tariffs to shield domestic industry. This would involve “short-term pain for a longer term gain,” he said.

Customs data show that BHP supplied 4,700 tonnes to the smelter, with additional shipments coming from Glencore and Hudbay.