Domestic copper surges in sync with LME trend

The prices of domestic copper products are toeing the LME line. Copper wire bar surged 13 per cent to Rs 267, copper sheet cutting spiked 16.5 per cent to Rs 233, copper utensil scrap was up 17 per cent to Rs 220, copper light scrap rose 15 per cent to Rs 238 and copper heavy scrap surged 14 per cent to Rs 246 in the last one and a half months.

In the international market, copper prices are gaining momentum but will lose steam in the coming months, by $25-50 per tonne, said Surendra Parikh, a leading Mumbai-based copper trader.

The prices are witnessing a boom on the LME owing to a supply crunch in the wake of impending strike at Chile's state copper mine, Corporacion Nacional del Cobre de Chile (Codelco). Copper prices today rose sharply to $4,515 per tonne, clocking a gain of 1.3 per cent from the previous close.

Around 20,000 workers at the world's largest copper producer, Codelco, threatened to go on strike after the company had rejected the union's petition last Friday for salary bonuses based on record high copper prices.

"These all are market gimmicks, which are dictated by traders. Fundamentals do not support copper prices as stocks are increasing. But operators are doing everything to perk up prices," said Parikh.

In the domestic market, copper supply is back to normal, but production activity is slack because of higher prices. Only 70-80 per cent of full-scale activities are on, as small traders and producers cannot afford to spend hefty sums at this risky stage, said a trader. If the prices decline, small traders, who hedge their risk at higher prices, would be in deeper trouble, he added.

Copper prices have been on a northward journey the world over, touching a fresh high on Tuesday on Comex amid light holiday-time volume. The most active March contract scaled a high of $2.07 per pound.

Analysts said the workers' union seeking higher wages has been a key feature of the copper market since copper prices hit record highs in 2005 on the back of tight supplies. They added that the unions are keeping close watch on copper prices.

Market sources estimate that low stock levels currently at exchanges worldwide leave supplies at about 3-1/2 to 4 weeks of consumption.

Copper futures traded on the Shanghai Futures Exchange today settled with prices rebounding from a drop early in the session on strong cash values in the domestic market, sources said.

The benchmark March 2006 copper contract slipped down CNY10 per metric tonne to settle at CNY41,920 per tonne, after trading between CNY41,700 per tonne and CNY42,150 per tonne. Total trading volume also declined to 47,534 lots of 5 tonne each from 56,990 lots on Tuesday.