According to sources, from a uniform pricing system earlier to customers across the country, the copper producers may change to ex-works pricing. This means that copper cathodes and bars prices will now vary from customer to customer depending on the proximity of the delivery destination from the smelter. To balance out the high fuel prices, they had recently started levying Rs 2 per kg freight charge across the country, irrespective of the distance. |
According to traders in Kika Street, the copper trading hub in Mumbai, the new mechanism would not only make the prices differ among manufacturers of copper articles, but would also set the market free to fix prices.
Meanwhile, the public sector Hindustan Copper (HCL) has not yet jumped on the bandwagon. It continues to provide freight rebate to its customers across the country.
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Birla Copper, the copper business arm of Hindalco, runs two smelters with 2,05,000 tonnes and 1,70,000 tonnes capacity while the third one with an installed capacity of 80,000 tonnes is shut. So, the total production capacity is now 72 per cent of the company's installed capacity. While Sterlite Industries, with a smelting capacity of 4,00,000 tonnes, runs at its full capacity.
Diesel is used heavily in firing the smelters while furnace oil is used in running them. However, transportation cost adds wound to injury.
The total fuel cost makes up between 10-12 per cent of the price of copper, of which one per cent is contributed by transportation from the concentrate to cathode plant, rod plant and then to consumers.
The fuel price hike has not affected domestic copper demand as of now, but a prolonged period of this sentiment may hit many developing infrastructure projects badly, a trader said.
Currently trading at Rs 342 per kg, the red metal has jumped sharply in the last three years from about $3,500 per tonne to $8,000 per tonne now.