Copper prices experienced a huge sentimental boost during April as the metal extended its recent spree of gains. The prices touched a six-month high in the domestic futures market as well. On LME it was the shrinkage of inventories and rise of equity markets that invoked confidence in the traders. Interesting to note was the fact that Copper prices got linked with equity markets in a big way and a direct correlation between the two was witnessed, unlike at the start of the year when Copper was rally despite the weak undertone in equities intensifying. The prices are expected to remain bullish in the coming days with the persuasions towards improvement in the economic picture now high.
High usage in electricity and other industrial applications:
Copper is the best non- precious metal conductor of electricity as it encounters much less resistance compared with other commonly used metals. It sets the standard to which other conductors are compared. Copper is also used in power cables, either insulated or uninsulated, for high, medium and low voltage applications. In addition, copper's exceptional strength, ductility and resistance to creeping and corrosion make it the preferred and safest conductor for commercial and residential building wiring. Copper is an essential component of energy efficient generators, motors, transformers and renewable energy production systems.
Refined copper surplus in January 2009 increases:
In a latest report released by International Copper Study Group (ICSG), preliminary data for Copper indicated a surplus of 150000 tonnes for January 2009 as compared to a deficit of 20000 tonnes during January 2008. However on a month on month basis the surplus remained unchanged. After making seasonal adjustments the surplus rose marginally to 160000 tonnes.
World refined copper usage decreases:
The ICSG report estimated that the refined copper usage for the period of January 2009 declined 144000 tonnes or 9.5% on a y-o-y basis. Major declines were registered in Japan, USA and European Union by 52%, 26% and 18% respectively. World usage outside China registered a decline of 18%. China was a major exception where the apparent usage increased to 15% due to high imports of refined copper.
World refined copper production increases in January 2009:
Total world refined copper production increased 35000 tonnes or 2.3% in January 2009. Copper primary production appreciated by 5.6% while secondary production (from scrap) decreased by 16.5%, reflecting the scarcity of scrap. Chile, China and the United States were the biggest contributors to growth, while production declined in Japan and some European countries. Refined production capacity utilization was about 77.5% in January 2009, compared with 79.4% in January 2008.
World mine production of copper increases :
World mine production for Copper grew 83000 tonnes or 6.8% in January 2009. Adverse weather conditions and operational problems led to reduced production. The mine capacity utilization also got affected and declined to 78.9% in January 2009 as compared to 82.3% during the corresponding period previous year.
Chinese copper imports continue to hit new records:
China copper imports continued to set new records in the month of April. China imports of unwrought and semi-finished copper rose 6.6 percent on an m-o-m basis, which is an all time high. The rise was a result of arbitrage trading opportunities, stockpiling by the state reserve bureau and rising hopes that the economy will revive soon. China, the world's top consumer of copper and aluminium, imported 399,833 tonnes of unwrought copper. China also produced 921900 tonnes of refined copper in the first quarter of 2009, up 8.7 percent from a year earlier, as per National Bureau Of Statistics. Mined copper output rose by 10.4 percent over the same period to reach 201800 tonnes.
Indian copper production declines in March:
Indian copper cathode production declined in the month of March. Both public and private sector companies registered fall in production. Hindustan Copper (HCL) copper cathode production in April-March 2009 was 30035 tonnes down 33% from April-march 2008. HCL production for the month of March 2009 was 1705 tonnes. Hindalco registered a downfall of 7.2% in the cumulative production for the period of April –March 2009. The production stood at 297797 tonnes as against 320930 tonnes on April-March 2008. Sterlite Industries (SIL) cumulative production (April-March 2009) was 312833 tonnes as against 339294 tonnes registering a decline of 7.8%. Total production of copper cathode in March stood at 65012 tonnes.
Grupo Mexico expects copper to remain in positive mode:
Copper major Grupo Mexico said strong demand from China coupled with tight global supply conditions will keep sustaining Copper above $ 2 per lb in 2009. Grupo Mexico is fighting court battle in U.S. to regain control of its subsidiary Asarco and is set to present its reorganization plan in May 2009.
Domestic Futures markets gain:
The local futures market witnessed some sharp swings upwards on the back of buying from the Chinese state reserves bureau. High imports data from China boosted the sentiments of other consuming nations as well. Domestic markets staged a bullish rally during the month of April, which also continued during the initial days of May. So far in 2009 the prices have leapt by Rs 80 per kg or 53%. The current range for prices in domestic markets is 235-242. On LME Copper three-month forward contract breached $ 4500 per tonne levels.
Outlook:
Copper prices have been volatile since the start of the year. In near future the prices are looking to surpass 250 levels in the domestic futures markets. Hope of revival in demand from US and Europe and buying spree from China will initiate rallies. On the other hand, Dollar has seen some fresh selling against the EURO and toppled to a seven week low against the single currency as concerns over the credit rating position of the US hurt the greenback.
US government has had a triple-A credit rating since 1917, but it is unclear how long this will continue to be the case given the plethora of money printing and mounting public debt in the world’s largest economy. A broad based debasement of the US dollar would support commodities and copper would derive a direct benefit as a result. This was precisely what drove the red metal to its all time highs in July 2008, even as the demand was shrinking worldwide.
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