How Global Copper Production Estimates Will Affect Indian Prices

The go-to international copper organization gives us a look into why copper production should outweigh demand in 2013.

The International Copper Study Group (ICSG) stated that while mine production was set to ramp up by 6.4 percent to 17.5 million tons and refined production by 6 percent to 21 million tons in 2012, refined usage would only rise by 1.5 percent to 20.7 million tons, thus creating a surplus of 460,000 tons.

Growth in mine production this year would mainly be from production at existing mines rather than new projects. Another major factor contributing to the rise in production this year would be enhanced capacity utilization.

A third reason for the step-up in production would be from secondary refined production, which is estimated to rise by 11 percent in 2013. Primary copper production, though, is expected to experience a lower growth rate of 6.5 percent.

So what about the Indian copper market and global prices?

Impact on Indian Copper
India is among top 20 major producers copper in the world.

The Hindu Businessline reported that if copper prices fell in the international markets, it would be in India’s interests since it was one of the world’s biggest importers of the metal, along with China, Japan, South Korea and Germany.

As a consequence, any volatility in the metal’s prices on the London Metals Exchange (LME) would have a major bearing on Indian copper trading.

Copper is currently trading at around US $8.03 per kilogram on India’s Multi-Commodity Exchange (MCX). The report said technical analysis of copper spot prices indicated that the medium-term trend for the base metal was sideways, with key support at $7.32 per kg.

If the resistance was breached, the next level of resistance would be at the psychological level of US $9.15 per kg. But if the prices fell below the $7.32 mark, it could spiral down to around $6.40 in the medium term.

Around 30 percent of India’s copper demand comes from the telecom sector and 26 percent from the electrical sector in India. Infrastructure projects in the country were likely to benefit from lower prices of copper.