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Copper prices have dropped over 15 per cent on the London Metal Exchange (LME) since April 1 this year as fears over recession setting in due to interest rate hikes have led to poor demand from end-user industries. In the domestic market, prices have dropped by over 10 per cent.
On the LME, copper three-month futures closed at $8,292 a tonne during the weekend. For cash, it was quoted at $8,280.50. On April 1, LME copper for cash was quoted at $10,246.
On the Multi Commodity Exchange (MCX) here, copper August contracts ended at ₹698 a kg on Friday. The red metal has dropped by 11.67 per cent over the past month globally and this week, it has dropped by 6.5 per cent. Its prices are also 12.5 per cent lower year-on-year.
Copper is often seen as a barometer of economic activities as it is used in various applications covering household appliances from electric vehicles to domestic wiring.
After witnessing a sharp rise due to demand and the Russia-Ukraine war, copper prices have dropped the whole of June till now, primarily driven by concerns over weak demand as central banks in various countries raised interest rates to curb inflation. China’s tough Covid-19 lockdown policies added to the declining trend.
In the domestic market, copper armature prices declined by 10 per cent to ₹665 a kg on June 24 compared with ₹740 on April 1. Armature price was at ₹713 a kg at the beginning of June, trade sources said. Copper wire rod prices have also declined by a similar margin during the period ₹715 a kg.
Slump in Indian demand
Copper is witnessing a slump in demand, say trade sources. Buyers are facing a liquidity crunch due to which they are opting to buy lower quantities. This has resulted in inventories building up.
On the other hand, traders have curbed purchases in advance and continue to face pressure ahead of the monsoon. They need to reduce their inventories before the monsoon advances as it is a lean period in the commodity market. Manufacturing units are also operating at lower capacities in view of lower demand from end-users.
“LME prices influence movement of domestic market prices,” SteelMint said in a report.
Strike in Chile
On the supply side, Chilean state-owned copper producer Codelco, the world’s largest producer, has been hit by a nationwide strike against its decision to close down a smelter due to environmental concerns. Codelco supplies around 8-10 per cent of the world’s copper. About 50,000 copper workers, including Codelco employees and contractors, have joined the indefinite strike.
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