India: Domestic copper prices on upswing as LME futures rebound

India's domestic copper market saw an upswing in scrap prices following the rebound in the three-month futures on the London Metal Exchange (LME). However, the industry is currently facing a delicate balance between supply and demand.

In this article, we will delve into the recent developments impacting copper prices, including the surge in demand for secondary wire rods in the northern region, and explore the factors contributing to the uncertain and mixed narrative surrounding the global copper market.

Uptrend in copper scrap prices, LME futures

Copper armature scrap prices in India have hit INR 673,000/t tonne, exhibiting a noticeable increase. Meanwhile, primary rod prices have risen by INR 5,000/t and are now standing at INR 725,000/t. The LME copper futures prices have seen a gain of 1.4%, reaching $8,200/t.

Surge in secondary wire rods demand

An intriguing development that has taken place in the northern region of India is a sudden surge in demand for secondary wire rods. This has significantly contributed to the rise in copper prices. As the trading activities commence at the beginning of June, the market has received strong support, further bolstering the upward momentum in prices.

Rebound in MCX prices

Copper prices on the Multi Commodity Exchange of India Limited (MCX) saw a slight uptick of 1% to INR 716,000/t. This positive movement reflects the renewed buying interest and the overall positive sentiment in the market.

Copper prices on the LME soared to record highs above $9,000/t in April. However, a sudden market shift led to a downward trend later. With the start of a new month (June), increased buying interest has breathed a new life into the market, resulting in a significant price rebound. This recovery is an encouraging sign for copper, especially after the previous week's decline of over 1%.

Challenges and uncertainties

Despite the recent positive developments, copper has been unable to reclaim its previous highs. LME copper inventories have reached a seven-month high level of 99,150 t, marking a 2,200-tonne increase compared to the previous week. Notably, these inventories have surged by over 50% in the past month. This influx of supply poses a challenge to the market equilibrium and contributes to the uncertainty in copper prices.

Peruvian state of emergency

The Peruvian government has declared a 60-day state of emergency in 131 districts due to the imminent danger of the possible arrival of the El Nino phenomenon. This is particularly significant given Peru's prominent role as a top copper producer. This has made the global market volatile.

Conclusion

The recent surge in copper scrap prices in India and positive LME futures prices suggest a favourable market outlook. However, challenges like increased inventories and a state of emergency in Peru create uncertainty. Supply, demand, and global dynamics have to be monitored to get a clarity on the copper price outlook.