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What is the demand-supply situation in copper, both globally and in India? What are the possible triggers for copper prices in the next 1-2 years?
P S Krishnan Copper prices have been recovering since May after having fallen in the initial part of the year. Data available upto April 2017 shows that global refined copper usage in the first four months of the year has declined by 3 per cent while supply remained relatively unchanged.
The drop in demand follows lower consumption in China. The country’s copper demand has fallen 7 per cent in the period. China is the world’s largest consumer of copper, accounting for about 45 per cent of the global copper demand. This has left the market with a surplus of 80,000 tonnes in the first four months of the year compared to a deficit of 1,85,000 tonnes in the same period last year.
Copper prices may remain subdued if this surplus situation continues. For copper prices to rise from here, Chinese demand should revive.
It is difficult to forecast price direction for the next 1-2 years. The assumptions made at this point in time based on the geo-political environment, demand-supply balance and the US dollar movement may not hold good for a long period. Hence, it is best that you review your holdings every three to six months.
From the charts, it looks like copper spot prices on the London Metal Exchange (LME), trading around $5,925 per tonne now, may remain range-bound for some time and move between $5,450 and $6,000. A breakout on either side will determine the next move. A break below $5,450 can drag the prices lower to $5,150 or $4,900. On the other hand, a strong break above $6,000 can take prices higher to $6,500.
On the domestic front, the copper futures contract on the Multi Commodity Exchange (MCX) is likely to move between ₹360 per kg and ₹415 per kg. It is currently trading at ₹390 and there is a likelihood of the contract rising to ₹415 in the coming weeks. If the contract manages to breach above ₹415, a fresh rally to ₹430 and ₹450 can be seen. But a pull-back from ₹415 will drag the contract lower to ₹380 and ₹370 levels.
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