Religare Commodities: Indian Copper Futures Prices Rising in Short Term

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Last year was quite a disappointment for copper prices – not only globally, but also locally in India – and a choppy one for Indian copper futures.

In addition to the southward movement of copper prices, among the factors that caused volatility in futures prices in 2013 on the Multi Commodity Exchange (MCX) Copper were the rupee-US dollar depreciation and a rebound in China’s growth towards the latter half of the year.

Now, while many experts have painted a pessimistic picture of copper prices in 2014, there are some who believe that if prices cross a certain level this year, India copper futures may also rise in the near term.

Religare Commodities, for example, seems to share this view. Coming out with a report earlier in the week on copper futures in India, it said the metal had witnessed stiff resistance on the higher side at about US $7.20 (Rs 450 per kg), which had led a decline in prices for four consecutive months, accounting for a loss of over 17 percent during the period.

But if, in the near term, prices in 2014 were able to sustain above the US $8 (Rs 500 per kg) mark, then copper future counters could shoot up to levels near US $ 8.50 (Rs 550-555 kg) in 2014, it said. India, of late, has become an exporter of processed copper.

The International Copper Study Group (ICSG) has predicted the copper surplus to reach a 13-year high. China’s consumption of refined copper was expected to grow faster in 2014, though not fast enough to boost imports significantly as production increases more quickly.

Other Indian analysts were of the view that the market for base metals in 2014 was likely to be supply-driven rather than demand-driven. Also, there’s hardly any chance of supplies drying up, even where copper is concerned.

But a Nov. 20, 2013, report by Jeffrey Currie, Goldman Sachs’ head of commodities research in New York, had said there will be “significant” declines through next year for iron ore, gold, soybeans and copper.

In the first week of the new year, copper futures in India had, on an average, shown an upward trend. On Jan. 7, copper prices gained 0.14 percent to touch close to US $7.50 (Rs 467.70) per kg in futures trade as speculators enlarged their positions on a firm global trend. On the MCX, copper for delivery in February gained approximately 0.14 percent in a business turnover of 2,122 lots.

Similarly, the metal for delivery in far-month April edged up by 0.11 percent, to about US $7.60 (Rs 472.20) per kg in 77 lots.

Analysts here have put this down to a firming up of global trends as declining inventories and the US manufacturing sector gaining momentum have outweighed concern that copper demand from China would slow down.

What This Means for Metal Buyers

A reduction in global copper stockpiles and a healthy appetite for the metal may continue to positively influence copper futures in India, at least in the near term.

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