Copper companies maybe one of the few sectors to be negatively impacted if customs duty was to be reduced from the current 25 per cent. Analysts said they expected the budget to lead to reduction in custom duty by about 5 per cent.
This move was significant in view of the Kelkar committee recommandation to reduce duty on all metals to 10 per cent by financial year 2005 and to 8 per cent by 2007. However, barring the reduction in duty on imports, increased incentives for investments in infrastructure will ultimately buoy demand for the copper and aluminium in the country.
While there are few listed companies in the copper segment, its reduction in customs will affect the copper division of Sterlite Industries negatively, an analyst at SSKI has pointed out in a pre-budget review.
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However, in case of Indo-Gulf, analysts expect the company to benefit from reduction in customs duty as it imports a substantial chunk to meet its requirement. Any reduction in customs duty on copper could be an earnings booster and could lead to better profitability for the company.
However, on the positive side, copper demand in general should get a boost from any thrust given to the power and telecom sectors.
A widening global supply deficit this year was expected to help copper outshine most of its peers in the base metals complex. However, it may come as a cropper owing to sluggish demand growth in the western world, which accounted for more than 75 per cent of global copper consumption, analysts warned. Analysts expect global supply deficit of 324,000 tons in 2003, compared with a surplus of 338,000 tons in 2002.