SMEs feel the heat as copper prices hit the roof

Suresh P. Iyengar | | Updated on: Feb 20, 2021
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The sharp spike in the benchmark LME (London Metal Exchange) copper prices to $8,806 a tonne from $7,755 from start of this month has put scores of small and medium enterprises in a tizzy — particularly when the demand is reviving slowly after the Covid impact.

In fact, copper prices have jumped 24 per cent from $6,702 a tonne logged in October. Notwithstanding the unprecedented rally, Citigroup expects copper prices to touch $10,000-12,000 a tonne given the huge demand-supply gap globally.

Vijay Aggarwal , Director, Solis Corporation, said the excess liquidity in the global markets has been driving metal prices on overseas exchange and upsetting the calculation of the domestic industries which work on 2-4 per cent margin.

There is a huge pressure on mobilising working capital and some of the orders for wires, cables, automobile parts and appliances by domestic companies are either getting cancelled or being trimmed to meet their budget, he added.

Domestic scenario

Copper prices in India have more than doubled from ₹25,000 a tonne to ₹52,000 in a month when the economy has contracted by 7.5 per cent, said Aggarwal.

The sudden increase in zinc and copper prices, too, has pushed up cost of its alloy brass which is largely used in making valves for various applications.

Sushil Rathod, Managing Director, Aarti Flow Controls, said the company has received good orders for making valves for gas cylinders but its margin is getting squeezed due to unexpected rise in raw material prices.

Any default in delivery of finished products will lead to blacklisting of the company and future orders would be cancelled, he added.

In a bid to ease the small industries’ hardship, the government halved the import duty on copper scrap to 2.5 per cent in the Budget.

Output, exports

Hindalco Industries’ refined copper production was down 33 per cent in the first three quarters of this fiscal which pulled down the sector’s overall output. Vedanta’s refined copper production from its Silvasa unit was up 27 per cent, while its 4-lakh tonnes per annum factory in Thoothukudi remains shut due to environment issues.

Copper exports jumped 173 per cent to 49,900 tonnes between April and November 2020 due to a sharp jump in exports to China by 186 per cent. Almost 99 per cent of total refined copper exports were to China.

Published on February 20, 2021

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