Copper Prices in India: It’s “Buy” For a While

Overall, the copper market in India, as with most of the other base metals, has turned bearish in the last few days, with a hint of a coming short-term recovery. A majority of investment analysts following copper trends were of the opinion that at the current price levels, it was the right time to buy copper since demand support in Indian markets was expected.

Traders preferred to put the “buy” option on base metal as analysts and traders do not expect their prices, led by copper, to go down much further from current levels. Some say prices could go down about 3-4 percent from current levels, only anticipating a recovery in the coming weeks.

Internationally, a combination of factors has dragged down the prices in the past three months. In this period, prices on the London Metal Exchange (LME) have declined 13.3 percent, mainly because of the euro zone crisis and the slowing down of the economy in China. But prices have started correcting themselves from April.

In spite of the international slowdown, the demand in the Indian market for copper and other base metals remains good for the medium term. Ashok Bafna, president of the Bombay Metal Exchange, told The Business Standard that copper demand in India was likely to continue and that current price levels were right for investors to buy copper.

At the start of the last week, the price of copper was up by 0.30% in futures trades. At India’s MCX commodities exchange, copper for delivery in June rose by Rs 1.25,(0.30%), to Rs 419.45 per kg, with a turnover of 28,780 lots.

The August contract, too, was up by Rs 1.20, or 0.28%, at Rs 424 per kg. But on subsequent days, prices fell.

True to its ongoing form though, on June 21, at the MCX, copper for delivery in June lost Rs 4.35, or 1.03%, to Rs 417.15 per kg.

The metal for delivery in August also fell by Rs 4.05, or 0.95%, to trade at Rs 422.10 per kg. Analysts said the fall in copper futures prices on June 21 was mostly due to a weakening trend at the LME and subdued demand at domestic spot markets and high inventories.

It was the same story the previous day. On June 20, select base metal prices had declined by Rs 2.00 per kg in the Indian non-ferrous metals market. Sentiments had turned bearish after copper declined as inventories at the LME warehouses advanced to the highest level in almost two months. Besides, a downfall in India’s industrial demand also put pressure on base metal prices, claimed traders.

In the previous week, mid-week, copper futures trades had recovered slightly at the LME on speculation that the US Federal Reserve was planning to take more steps to safeguard the economic recovery, boosting demand for industrial metals.

Analysts are saying the reasons for demand support at lower levels were also based on the fact that there would be limited supply of copper in the medium term because of the postponement of some new mining investments internationally.

Buying the metal at current price levels could be a good option because many expect copper prices to rebound in the third quarter of the year if the Chinese economy picks up pace.

Sohrab Darabshaw contributes an Indian perspective to MetalMiner.

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