Copper utensils hold a special place in Indian culture and history. Traditionally, copper utensils have been extensively used for religious offerings. During Dhanteras, the copper utensil market generally experiences a rise in demand as many believe it to be auspicious to buy metal during Dhanteras.
Copper is a base metal like nickel, zinc, aluminium and lead and is indispensable for various industries. The major copper producing countries are Chile, China and Peru. Total global copper production from mines amounted to an estimated 22.5 million metric tonnes in 2016. In FY 2017, the volume of copper production in India amounted to about 1,34,790 metric tonnes. The copper supply and demand balance are estimated to call for a deficit in both 2018 and 2019 in India. To meet this development, the use of copper scrap for recycling purposes is now relatively high. Prices of copper have increased rapidly over the last decade. India is presently ranked fifth in global refined copper production. During FY 2018, refined copper production grew by 6.0% year-on-year compared with 0.9% in the last year. Demand for refined copper has risen on account of use of copper in building and construction activities and in electrical wiring. Development of the smart cities and metro projects has amplified the use of copper.
India has been a net exporter of refined copper. Exports during the year April-February quarter in 2018 were around 344 thousand tonnes. Exports from India have increased as the global copper market is facing a deficit due to low availability of copper ore. China is the main importer of Indian copper.
‘CARE’ Ratings, Views and Opinion: outlook for Copper Industry for FY 2019
Global copper prices are expected to hover around $6,800-7,000 per tonnes during the short to medium term period on a monthly basis. In light of the order of the permanent closure of the Tuticorin smelter, the production of domestic refined copper is expected to be around 510 KT during FY 2019 resulting in 40% drop from the FY 2018 production levels. India’s refined copper production during FY 2018 was 843 KT. The Tuticorin smelter accounts for 40% of the country’s copper smelting capacity and has contributed around 48% of the refined copper production during FY 2018.
Demand for the domestic copper market is dependent largely on the electrical (34%), building and construction (8%), automobiles (11%) and the consumer durables segments (8%). We estimate domestic demand of refined copper to be around 530-535 KT during FY 2019. Even if the two existing producers (Hindalco and HCL) increase their utilisation rate, it will not be sufficient to meet the domestic demand. The industry’s current utilisation level is well over 80% and even if they raise their utilisation levels to 100%, they cannot meet the shortfall. It is expected that the copper supply will be facing a deficit in the near future as copper concentrates are high in demand and the supply is limited.