New Delhi, May 13 Copper prices continue to linger around seven-month lows over fears of a global economic slowdown and rising Covid cases in China, the world’s largest consumer of the base metal. The price has hovered around the $9,000 a tonne range over the last few days at the London Metal Exchange, down from the October highs of around/ over the $10,000 per tonne range.
Often seen as a barometer of the world economy, copper has slipped 15 per cent from the record highs set in March as investor focus shifts from concerns about tight supplies to weaker consumption. Fears are rising that US monetary tightening, shaky European economies and stringent Covid-19 measures in top user China will hurt metals demand globally as well as in India.
According to Hetal Gandhi, Director at CRISIL Research, after being in deficit over the past two calendar years, refined copper may be in a marginal surplus now with supplies from Chile, Peru and Africa improving. This trend should continue and, along with rising interest rates, will put downward pressure on prices.
On the Indian exchanges, copper futures of Grade A copper cathodes stood at around Rs 748 per kg, down by nearly three per cent, over the Rs 764 per kg seen on May 3; copper armature scrap prices (CU99 per cent) were down to Rs 705/ kg, lower by over 4 per cent, against the Rs 736/kg price it commanded on May 4.
The domestic price of copper wire bars averaged Rs 738 per kg (ex-factory) last fiscal, a 42 per cent increase year-on-year, with prices breaching Rs 800 per kg in March, before retreating to Rs 790 per kg.
Jagmohan Sood, Director, Jindal Stainless (Hisar) Ltd said, over the last few weeks, most metal prices have decreased on the London Metal Exchange and other exchanges. A wave of rising coronavirus cases in China, hinting at a further lockdown-like situation with strict restrictions, and the recent increase in interest rates by the Fed.
“Consequentially, market participants are worried about stable demand levels, chiefly with respect to China. In the last one month, prices of nickel, copper, and zinc have slipped by nearly 15 per cent, 17 per cent and 12 per cent, respectively,” he told BusinessLine.
For the rest of this fiscal, however, we see domestic prices declining gradually, to average Rs 720-725 per kg. Prices are expected to remain under pressure, say analysts tracking the sector.
According to Koustav Mazumdar, Associate Director, CRISIL Research, the treatment charge and refining charge (TC/ RC) margins have been clawing up over the past four quarters (for Indian players), hitting $80 per tonne in the second quarter of calendar 2022, implying a 48 per cent rise.
“As mine supplies in Peru and Chile normalise over the year, aided by new capacities in Africa, TC/ RC margins will improve further.”
Indian players, analysts say, are mostly converters and refiners, given their limited access to mines. Their profitability depends primarily on TC / RC margins, which is dependent on availability of copper concentrate.
Supply of copper concentrate was impacted in 2020 and 2021 as Peru and Chile grappled with issues ranging from Covid-19 to labour strikes.