The Hindu Business Line : China’s growth fuels copper prices

Price trend
An International Copper Study Group report shows the world refined copper consumption outpacing production.
With the Chinese Government trying to cool down the economy, metal prices may drop in the long term.

Suresh P. Iyengar

Mumbai, July 22 Copper prices have just turned hot with China’s GDP surging to 11.9 per cent in the second quarter. Apart from this, the ongoing strikes in Chile’s Codelco mines and Canadian Copper Refinery too left its impact on the price-line.

However, in the long term, copper seems to be bearish as the Chinese Government has raised its interest rate by 27 basis point (0.27 per cent), which is expected to slowdown the economy and reduce the demand for metals —including copper, setting in a bearish sentiment.

metal prices

“China’s demand dictates the price trend for metals. With the Chinese Government trying to cool down the economy, the metal prices may drop in the long term,” said Mr Harish Galipalli, Head of Research, Karvy Commodities.

Indian metal markets mirror more or less of the international trends in the sector. Copper futures on MCX rose from Rs 316 per kg on Monday to Rs 327 a kg on Friday. Over the last 20 days it has gained about 4 per cent.

Striking Workers

On Friday, copper for three-month delivery on London Metal Exchange (LME) hit a fresh six-week high of $8,137 per tonne against Thursday’s close of $7,971 on positive demand indicators from China combined with the prospect of tighter supply as Shanghai stockpiles declined.

The Shanghai Futures Exchange reported that its existing copper stockpiles dipped 0.89 per cent to 91,182 tonnes in the week ended July 20, while the London Metal Exchange said its stocks of the metal fell by 1,350 tonnes to 98,675 tonnes.

Copper gained some 5 per cent on the LME since the beginning of this month. Codelco reported a fall in production at its El Salvador and El Teniente (Codelco’s second-largest copper mine) mines owing to protests by striking workers, and a below normal production at its Andina mine due to poor weather conditions.

“Yet another strike could be in the offing as Peruvian workers at Southern Copper are preparing to vote on the issue of strike over wages,” a Sharekhan Commodities report said.

Outpacing Production

An International Copper Study Group report shows the world refined copper consumption outpacing production by 2,65,000 tonnes in the first four months of the year compared with a surplus of 35,000 tonnes in the year-ago.

ICSG report also said that the Chinese copper usage grew 38 per cent in the first four months of 2007 from last year, suggesting demand in the world’s biggest consumer of the metal remains robust.