Scrap merchants are looking to liquidate inventories in view of the high prices that non-ferrous metals are fetching . Most of them have stocked the metals, particularly copper, for over a year, tracking its surge since February 2009.
Copper, widely used in the power and construction industries, touched about Rs 350,000 a tonne in late April, following global cues, like controlled supply from Chile, the leading producer of the red metal.
The price of these metals is governed by the movement in market indices.
Prices, except of gold — which is seen as a crisis commodity — go up when markets perform better and vice versa. Though many rely on spur-of-the-moment decisions, many others are keenly studying market dynamics for better inventory management.
“The scrap business is not standard, as it is witnessing highs and lows. This business is mainly driven by the Sensex movement,” says Srinivas, a scrap merchant, with a new-found interest in the markets.
He had about a tonne copper stored from last year. The price touched Rs 350 a kg last year while he was making arrangements for its delivery, but dived to about Rs 250 a kg and stayed flat. Thereafter, he held on to the stocks and sold it only a few weeks ago for about Rs 330 a kg.
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“The warehouse space was occupied and other material could not be brought in,” he said.
The demand for copper, which is seasonal, is also high. Copper movement also impacts other industrial metals like nickel and tin. The stainless steel industry consumes about two-third of the nickel production for rust-free applications in infrastructure projects, household utilities and furniture.
Copper consumption is expected to grow by 3.3 per cent and outpace growth in output, expected to be 2 per cent. Price movements will also depend on the dollar’s value.
Earlier, copper was sent to Delhi for melting. But small some units coming up in Hyderabad are enabling local businessmen to save on transport costs.
The scrap business thrives in Begumbazar, Kukatpally, Patencheru, Jeedimetla and other areas where industries are concentrated.
Aluminium and steel prices, too, have seen a small decline. Metals apart, paper and glass are the other items that are traded in bulk. Most of the paper is sent for recycling, while the packaging and furniture industries also use a lot of paper. Food, mainly fruit, also consumes a lot of paper, said Laxman, another dealer. The prices of paper too have declined significantly, he said.
M Sriram Murthy, chairman of the Industrial Development Committee at the Federation of Andhra Pradesh Chambers of Commerce and Industry, said that the scrap business involves people across levels — from hawkers who pick the scrap up on the streets to organised players who participate in auctions conducted by companies to lift stocks.
The business is a high-volume, high-turnover one. This does not need big skills and most people rely on market dynamics. “The margins will not be affected, as the prices will be market-linked. However, the duration of inventory will be the key,” he said.