India Copper Price Outlook: China Demand, USD-Rupee Rate at Play

The first half of August witnessed a seesaw movement in the prices of copper, on both spot and futures markets, in the Indian base metals market.

Some of the factors that led to the rally in copper and some base metals prices were the release of China’s industrial data, the weakening of the Indian rupee against the US dollar as well as increased domestic industrial demand for copper.

In the week of Aug. 5-9, copper prices in India gained 3.8 percent over the previous week. On Aug. 9, Indian copper markets opened strong, considering the fact that the London Metal Exchange (LME) copper was moving from strength to strength after the release of Chinese data. Indian traders, like their LME counterparts, were enthused by China’s July industrial production figures that registered a rise of 9.7 percent year-on-year, above market expectations of a 9 percent increase.

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China’s Consumer Price Index rose 2.7 percent on-year last month, followed by a rise in Chinese imports. Chinese unwrought copper imports gained by 8.1 percent to 410,680 tons in July 2013. The total imports of copper in June 2013 were 379,951 tons. China accounts for around 40 percent of global demand for copper. On Aug. 8, for example, Indian copper contract settled at about US $7.15 per kg, which was about 1.5 percent higher than the previous day’s closing.

Copper prices in India are fixed on the basis of the previous day’s rates on the LME. They are also affected by macro-economic factors such as currency rate and interest rates. On Friday, Aug. 9, LME cash copper had closed at $7,253/ton.

According to the Press Trust of India, traders attributed the rise in copper and nickel prices to increased industrial demand. Copper price movements in the first two weeks here have ranged between approximately US $6.8 per kilogram and US $7.2 per kilogram.

While China was the clear reason for the rise, market analysts said that the fall in copper futures trade towards the end of the two-week period was mostly because of the weakening trend overseas as better-than-expected US trade data fueled by concerns of the Federal Reserve reducing its bond purchases this year, reducing economy stimulus, and also a weakening demand for base metals.

Copper Price Forecast?

Copper prices also came under pressure from the currency markets because of the greenback gaining strength against the Indian rupee. According to a report in the Hindu Businessline, experts here feel copper may underperform as they point out that the recent rally in copper prices may be turned into an opportunity to sell short.

Also, given the fact that copper production growth will continue to gather momentum during this quarter, prices could move down in Q4 this year.

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