India: Global downturn drives domestic copper prices lower

The copper market in India witnessed a downswing in prices w-o-w following the drop in three-month copper futures by $321/t on the London Metal Exchange (LME).

Currently, the international market is affected by several factors, including a significant decrease of 18.8% in profits for China's industrial firms during the first five months of 2023. These companies are struggling with reduced profit margins due to weakening demand in the aftermath of the pandemic.

However, the impact on copper prices was partially mitigated by limited global inventories and optimistic expectations about future demand, SteelMint notes.

The US dollar index rose by 0.7% w-o-w to 102.84 w-o-w.

Furthermore, sluggish demand during a typically weak season has contributed to the downward movement in prices.

Copper supply crunch imminent

Global exchange copper stocks sank 9,275 t w-o-w to 77,050 t and by 22,650 t m-o-m.

This has raised concerns about the availability of supply, particularly if demand from China, the leading consumer, starts to rise due to the implementation of additional stimulus measures.

State-owned producer Codelco has temporarily closed its Ventanas copper smelter in Chile. The smelter has a smelting capacity of 150,000 tonnes(t)/year.

Global copper mine production growth for 2023 has been revised downward by the International Copper Study Group (ICSG).

It may be noted that global copper mine production growth for 2023 has been revised downward by ICSG from 5% to 3% due to operational issues, equipment breakdown, adverse weather, landslides, and updated regulations in multiple countries.

MCX copper prices dip

Copper prices on the Multi Commodity Exchange (MCX) fell for the second consecutive week. Prices fell 2.5% to INR 711,000/t w-o-w.

Copper armature scrap prices in India stood at INR 673,000/t, while primary rod prices fell by INR 12,000-13,000/t w-o-w to INR 740,000/t.

LME copper futures fell $320-330/t to reach $8,281/t today as against $8,602/t on 21 June.

Conclusion

The combination of subdued market sentiment during the current monsoon season, an increase in the US dollar index, and decline in profits of China's industrial firms have collectively led to a decrease in domestic copper prices. Nevertheless, there are concerns in the industry as regards ongoing supply shortage which could impact overall market dynamics.