By Sohrab Darabshaw
It's still early in the game to predict the impact of the present-day Chinese export crisis on India's copper trade and business, though for now, "tread with caution" is the general line adopted by all the major players, say some Indian analysts.
Global stock indexes declined for the fourth day and copper hit four-year lows before rebounding on Wednesday over fears of China's economy slowing down.
In a sense, India, too, was sailing in the same boat as China where copper exports were concerned. According to Indian research company InfodriveIndia.com, India's copper and copper articles exports in January 2014 had fallen by 8.78 percent to US $314.84 million, compared to December 2013.
The agency said exports of refined copper and copper alloys unwrought had fallen on a month-on-month basis by 11.5 percent in January this year. The total value of exports in that month was US $262.14 million, compared to December 2013. The major destination countries of Indian copper were China, Mexico, Colombia, Vietnam and Taiwan.
Some economists here have said a wait and watch attitude on the Chinese copper data is the best line for now, since the January-February timeframe is traditionally considered a slow growth period where China is concerned.
In its report, another agency, India Ratings and Research (Ind-Ra), has said it anticipated a global oversupply risk to persist for copper in the near term. The reduced demand from China and historically high systemic inventory levels of the metal will keep its price suppressed, but a surge in demand from the US and Europe could support its price above the current level.
Ind-Ra analysts have predicted that Indian players were only likely to benefit from a surplus in concentrates in China and consequent stable treatment charges and refining charges (TC/RC) in FY15. Indian integrated players such as Hindustan Copper Ltd., they said, were better placed currently, as India was largely dependent on imported ore. To the extent currency and global copper prices exhibit limited volatility, even custom smelters, which were typically non-integrated, were expected to benefit.
Copper on the London Metal Exchange (LME) had dropped to a session low of US $6,376.25 a ton, its weakest since July 2010, before recovering to trade at $6,544.75, while Shanghai copper futures fell by their 5 percent daily limit on Wednesday. China has used both iron ore and copper as collateral for loans, adding pressure on the performance of these metals.
For the past week or so, the Indian copper trade market has only been a reflection of the LME movement. In early trade on Thursday, copper prices fell by about US $6.5 per kg, about 0.43 percent in futures trade, as speculators reduced positions.
At the Multi Commodity Exchange (MCX), copper for delivery in April traded lower, which analysts attributed to a weak global trend over concerns that the slowdown in Asia's largest economy was worsening.