Copper Prices Remain Volatile in the First Quarter

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Copper prices remained so volatile throughout the first quarter of 2012 that it kept investors on their toes. Even after reporting a gain at the end of March, copper prices fell 0.22 percent to Rs 438.10 ($8.70) per kilogram in futures trading on April 3, reports Business Standard.

According to the report, sluggish demand on domestic spot markets also put pressure on the futures trade.

Reports suggest that copper rose 11 percent in the first quarter, up more than any other quarter since surging almost 20 percent in the fourth quarter of 2010.

Market observers believe that China consumes about 40 percent of the world’s copper, but investors are concerned about recent signs of a slowdown in China because Beijing has recently downgraded its growth outlook for 2012.

Available figures suggest that globally, Chile accounts for 34 percent of total world copper mine production; Peru, the US, China, Australia and Indonesia together are responsible for around 32 percent.

According to the International Copper Association (ICA), India has estimated recoverable reserves of 537.86 million tons of copper, which constitute around 1 percent of global reserves.

Karnataka, Rajasthan, Bihar and Madhya Pradesh states account for a major production of copper in India.

Copper plays a very important role for a country’s economic growth because it is used in the manufacture of electrical machinery, cabling for power, building, telecommunications, and automobiles.

Copper also has significance because the power sector and electrical industry consume an appreciable bulk of the total amount of copper produced in the world, and the power sector is considered the main growth factor for any economy in the world.

According to preliminary data released by The International Copper Study Group (ICSG), the refined copper market balance for December 2011 showed a production surplus of 41,000 metric tons, despite record-high Chinese apparent usage (831,000 tons), as usage was weak in the other major consuming regions due to the year-end holiday period.

An official statement issued by ICSG says that the global apparent refined copper balance for 2011 overall, including revisions to data previously presented, indicates a production deficit of 358,000 tons, nearly equal to the deficit of 377,000 tons in 2010.

In 2011, world usage of refined copper grew by around 3 percent (610,000 tons) to 20 million tons, principally owing to increases in Chinese and Russian apparent usage of 7 percent and 60 percent, respectively.

Growth in the US and the European Union (EU) weakened as the year progressed, and in 2011, usage grew by a modest 0.1 percent in the US and declined by 1.3 percent in the EU.

Today, India has become a net exporter of copper after being a net importer during the last decade.

About a decade ago, the Indian copper industry consisted of a single state-owned company and now Sterlite Industries, Hindalco, and Hindustan Copper are responsible for the production and refining of copper in India.

State-owned Hindustan Copper is a vertically integrated producer, whereas Hindalco and Sterlite Industries are mainly custom smelters. Hindalco and Sterlite Industries account for more than 80 percent of India’s total copper production.

TC Malhotra contributes to MetalMiner from New Delhi. 

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