High prices hit copper smelters

The Rs 1,200 crore domestic secondary copper industry is facing intense heat of rising copper prices on the London Metal Exchange (LME). Copper handicrafts and utensils manufacturers are the worst hit, as they end up paying higher prices to procure the raw materials, even as consumers stay away from purchases following volatility in prices.

"Price rise is a good sign for a healthy market. But volatility beyond imagination, to the tune of $500-$600 in a week, is bad as it hampers the entire buying sentiment in the market," said Rohit Shah, president, Bombay Metal Exchange.

Explaining the normal trade practice, Shah said, "Although we sell the existing stocks at slightly higher prices, the new investment gets blocked completely due to uncertainty over the price trend."

"If we infuse fresh funds and price declines dramatically, we would end up with losses. Hence, we prefer to wait and watch till the price comes down to normalcy," Shah added. The secondary copper smelters have reduced their production capacity by up to 60 per cent. A majority of the unorganised players are already out of the business. "We cannot shut down completely as the revival of any smelters costs more than two-three years of business value. But, we do reduce production capacity to the tune of up to 60 per cent," a local smelter said.

India produces about 1 million tonne of copper, roughly 50 per cent of which comes from the secondary sector. Consumers tend to wait till the prices stabilise, resulting in huge build-up of stocks, while the producers prefer to think twice before taking any concrete decisions on buying raw materials.

Copper ingot is the only raw material for handicrafts and utensils manufacturing. The price of this raw material is determined by the LME.

Copper price on the LME jumped $549 last week to settle at $7,465, thanks to a 2,100 tonne decline in inventory. Stocks in the LME-registered warehouses slumped to 178,975 tonne towards the end of the last week from 181,075 tonne in the beginning.

Though the industry had replaced the one-year contracts with short-term ones ranging from 1-3 months, there was still a need to have a re-look at the existing contracts, a scrap dealer said.