Base metals have recorded a sharp rise in prices as global demand picks up. Rising alongside are the share prices of the leading metal companies in the country like Sterlite, National Aluminium Company and Hindustan Zinc.
In the last two months, the price of copper, used in the making of electrical equipment and wires, has risen 16 per cent, touching a 19 month-high of $7,855 per tonne on the London Metal Exchange on Thursday.
The price of the metal is now only 11.7 per cent below its all-time high of $8,900, achieved on July 2, 2008.
The share price of Sterlite Industries, India’s largest copper producer, gained 14 per cent and moved up to Rs 855.7 a share on the Bombay Stock Exchange (BSE) in the last two months. Sterlite officials were not available for comment.
“Chile, which is one of the largest suppliers of copper concentrate, got an earthquake in February that has affected mining activities,” said Giriraj Daga, an analyst with Mumbai-based Khandwala Securities. This led to the rise in prices of copper concentrate and ultimately that of copper. Indian copper producers largely buy the concentrate, as they do not have their own mining.
Similarly, the price of zinc gained 11 per cent to touch $2,377 per tonne on the international exchange. The demand for the metal, used in galvanisation of steel, is rising as steel consumption goes up.
The stock of Hindustan Zinc, the largest producer of the base metal, gained 11 per cent in two months to reach Rs 1,241.6 a share.
Aluminium, used in automobile and construction, gained 13 per cent in the same period to touch $2,322 on the exchange.
“Demand for aluminium is now coming from all regions, including North America and Europe,” said B L Bagra, director, finance, at state-controlled National Aluminium Company. “This has helped the price to move above global marginal cost of production, and ultimately boost our profitability,” he said. Marginal cost of production or the break-even level for aluminium production is about $2,100 per tonne.
The stock of the company has gained 3 per cent on the Bombay Stock Exchange (BSE) in the last two months. The stock of Hindalco, that makes both aluminium and copper, has gained 23 per cent during the period. Hindalco officials were not available for comment.
| TWO-MONTH EFFECT STOCK MOVEMENT | ||
| Share price in Rs | 1-Feb 2010 | 1-Apr 2010 |
| Hindalco | 149.19 | 183.80 |
| Sterlite Inds | 752.90 | 855.75 |
| Hindustan Zinc | 1114.30 | 1241.60 |
| Nalco | 391.95 | 405.10 |
| Sensex | 16356.03 | 17692.62 |
| Data Complied by BS Research Bureau Source: BSE | ||
| BASE METAL PRICES* | ||
| $/tonne | 1-Feb 2010 | 1-Apr 2010 |
| Copper | 6,768 | 7,855 |
| Aluminium | 2,052 | 2,322 |
| Zinc | 2,134 | 2,377 |
| Source: * London Metal Exchange | ||
Demand is emanating from US and Europe. In March the US manufacturing sector grew at its fastest pace in more than five years while activity in Europe picked up with a cheaper euro helping stimulate exports.
“Overall economy is improving, so the inventory levels are coming down and that is ultimately pushing the metal’s price,” said an executive working for Vedanta Aluminium talking about the rise in base metal prices. He did not wish his name to be quoted.
According to World Steel Association, the global demand for steel is expected to rise 11 per cent in 2010. This has pushed the demand for Zinc.
“Demand for aluminium and zinc is sustainable at these level as they are still significantly away from their all time high,” said Paresh Jain, an analyst with Angel Broking, Mumbai based brokerage.
