Excise raids take sting off local copper trade

The recent excise department raids on metal workshops in Delhi has hit domestic copper trading, which was otherwise upbeat following the recent record high of $4000 a tonne hit on the London Metal Exchange (LME).

This year till date, copper has gained $895.5 from $3133.5 on January 4. The red metal shot up to $3892.5 a tonne on Thursday in kerb deals, whereas warehouse stocks data showed a decline of 3,475 metric tonne to 71,500 tonne.

However, copper wire bar prices in Mumbai was stagnant at Rs 230 a kg, while red heavy copper was marginally up at Rs 210 a kg.

Rohit Shah, president, Bombay Metal Exchange, said following the raids, traders were hesitant to conduct business as they do not want land in problems. Shah said north was the main market for metal trades which was hit badly because of the lack of buying sentiment.

"The excise department seized huge amount of copper and scrap under unfair trade practices which was creating a big hurdle in smooth trade today. Secondly, because of rising prices traders were preferring to wait and watch," Shah added.

According to Surendra Mardia, senior vice-president, Bombay Metal Exchange, some players were also cornering the metal to make a quick buck. "It's just not fundamentals which are driving the market," Merdia said.

Meanwhile, Zambia has halved copper production to 300 tonne a day compared with 600 tonne a day sometime back owing to rising energy costs. Other producers have also announced their annual maintenance shutdown in September which can go even longer in case energy prices are not declining.

Indian traders have no choice but to buy as the country's copper output can meet only 60 per cent of the demand.

"We are expecting the price to crash in near future. But looking at the growth rate it looks like prices would not decline till December. In January, when fresh contracts will be signed, fresh rates would be announced, new negotiations are taking place, wages of workers are finalised, only then copper price will take the definitive direction. Till then, copper would range between $3500 and $4500 a tonne," Merdia said adding that a sudden supply boost could, however, bring down prices.