High prices hit trading in copper market

Trading activities in the domestic secondary copper markets have come to a standstill because of sky-rocketing prices globally.

An otherwise crowded Kika Street, the renowned secondary copper trading centre in Mumbai, is wearing a deserted look with buyers giving a complete miss to active trading.

However, need-based buying, which accounts for 5 per cent of daily volume, still continues in a small quantity. In a significant development, a majority of secondary copper traders are considering shutting down their copper business and switch to others lucrative areas including stock broking.

Kika Street in Mumbai constitutes about 90 per cent of the country's secondary copper trade. But, nowadays, the street is hardly seeing any activity, and traders are not showing any interest in fresh booking.

"Rising global copper is responsible for the situation," said Surendra Mardia, president, Bombay Metal Exchange (BME), an association secondary copper processors in India.

BME is currently advocating with the government to remove copper waste, brass waste and other similar items from the "hazardous list of imported goods," which if imported, requires environment clearances.

On the London Metal Exchange (LME), the world's largest copper trading platform, copper prices surged to the lifetime high of $8,788 on May 12, 2006. On Thursday, it was quoting at $8,760 a tonne, a rise of 51 per cent from $5,811 a year ago.

In the domestic market, however, the global price rise has not yet impacted completely as the price-sensitive Indian traders keep off the market whenever the red metal heads towards peak. Copper wire bar perked up by 21 per cent to Rs 410 a kg on Thursday compared with Rs 338 around the same day previous year.

Expert said that domestic consumers would not be affected by the price spike globally as the country was a net exporter of copper.

"Buyers keep off the market in case price starts firming up, thus triggering cooling effect," said a trader. Analysts said traders would have to wait before resuming their business as the surge in copper prices were expected to continue in the near months.

A price hike in all agri and non-agri commodities coupled with the US economy slipping into recession and dollar weaknesses is likely to push investors into commodities.

Therefore, copper prices are likely to hit an all-time high and the psychological barrier of $9,000 by early next week. India produces about 1.5 million tonnes of copper of which 50 per cent comes through secondary route. The country consumes about 800,000 tonnes of copper while the balance is exported.