Demand for base metals in India could rise next week, particularly for copper and zinc, helped by a surge in construction activity and on higher buying of geysers and other heating equipment, as winter sets in.
A sharp rise in global base metal prices on hopes of an improvement in the global economy has pushed up the prices of base metals on local bourses, though a stronger rupee has capped gains, traders said.
The partially convertible rupee, which plays an important role in determining the prices of dollar-denominated metals, extended gains yesterday. It rose to its highest level against the dollar in over two months on Thursday.
Traders expect copper demand to rise next week as sales of heating appliances such as geysers, particularly in northern India, are likely to rise with the winter setting in.
“As winter in northern India progresses, it will boost demand for geysers and other heating equipment, and it could compensate for the decline in sales of air-conditioners,” said Metulbhai Dalal, a copper dealer in Mumbai.
A pick-up in construction activity due to better availability of labour after the end of the harvesting season could also push up copper demand this week, Dalal said.
Three-month copper on the London Metal Exchange was trading up 0.77 per cent at $7,960 per tonne from Thursday's close. The contract touched a five-week high earlier in the day on hopes of a recovery in the global economy and improvement in demand from China, the world’s largest consumer of copper.
In the Mumbai spot market, copper rose Rs 3.85 to Rs 436.7 a kg from Thursday's close.
Zinc demand in India is likely to remain buoyant, as it is used widely in the construction sector as an anti-corrosive agent.
“As construction and other economic activities are gaining pace in the country, demand for copper and zinc is likely to remain high,” said Arvind Singh, a metal dealer based in Ghaziabad near Delhi.
India, the world's third-largest producer of zinc, has the capacity to produce around 1 million tonnes annually. Hindustan Zinc Ltd, controlled by Vedanta Resources, accounts for around 82 per cent of the total production.
Zinc in the local spot market was trading flat at Rs 107 a kg from Thursday's close. The November zinc contract was trading up 1.18 per cent at Rs 111.55 a kg.
Most traders expect lead demand in India to remain subdued for a second successive week as a likely fall in automobile purchases in December could cut sales of batteries.
Added pressure could come from a fall in demand for power back-up devices, which use batteries, as cold weather sets in during December, traders said.
