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Copper - Will it take off?

Dec 7, 2000

Copper prices, which slumped to $1,350 / MT in March '99, have run up significantly over the past 18 months. In September '00 copper prices touched a high of $ 2,000 / MT. The key copper consumption industries are telecommunication cables and housing (winding wires). These sectors have approximately a weightage of 34% and 28% in the growth of copper demand.

Sector Consumption Growth Cont. to
Cu growth
JFTC 30% 12% 3.6%
Power cables 8% 10% 0.8%
Winding Wires 25% 12% 3.0%
Transformers 10% 7% 0.7%
Transportation 5% 10% 0.5%
Process Industry 10% 8% 0.8%
Others 12% 10% 1.2%
Total 100%   11%

With strong demand from emerging markets the demand supply balance is expected to tilt towards a shortage. Such a scenario could help sustain buoyancy in prices.

Global demand / supply scenario
('000 tonnes) Production Consumption Gap
FY00 14,343 14,267 76
FY01 14,712 14,782 (70)
FY02 15,163 15,339 (176)
FY03 15,622 15,903 (281)
FY04 15,938 16,429 (491)

The new telecom policy (NTP '99) promulgated by the Government aims to increase the tele-density in the country to 15% by FY10 from the current levels of 2.7%. This is anticipated to increase the number of telephone lines to 150 m. The scorching growth could be the impetus for future growth in demand for copper. As demand for properties rises the housing sector is expected to boom. This will add to the demand of copper required for electrical wiring of the premises.

Consequently, the domestic markets are anticipated to register a robust demand for copper. The demand supply gap in domestic markets is expected to touch 110,000 MT by FY04. The global and domestic demand supply imbalances could cause copper prices to remain firm.

Resultant to the high growth in demand and firm copper prices, the treatment charges and refining charges (TC/RC) may continue to remain favourable, which is crucial to the refiners' fortunes. These charges rose by 20% in FY00, which boosted the refiners' bottomlines. Should demand conditions and price realisations materialise the smelters could witness a prolonged period of high growth.


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