Future of Copper in 2012

Copper which is also known as industrial application in construction, electrical, consumer product, etc-makes it an economic bellwether. Therefore it is no coincidence that the worsening global economic condition is accompanied by a sharp fall in copper prices .Since march 2011, copper prices have fallen by more than 30 percent . Rio Tinto got the order for making Olympics 2012 Medals Tally Update , where they will be manufacturing Olympics Gold , Bronze and Silver Medals . Shakeel Ahmed ,CMD, Hindustan copper explains such a fall by saying ,”There are actually two drivers  of copper prices :one is the  Chinese  economy and the second is the us economy .At the current moment ,the Euro  zone crisis is the biggest dampener that has led to correction in the prices of copper .”There would have been further fall had there been no production cuts in Chile, Peru the United States by four percent that account for almost half of the copper ore production globally.

However China, which accounts for around 401 percent of the worlds copper consumption, influence copper prices in a major way. The current weakening in the copper prices has a lot to do with that is happening in China. According in the international copper study group (ICSG , China’s apparent usage declined by six percent in the first half of the year. It’s refined copper imports too declined by 40 percent .This was mainly due to a lack of seasonal restocking that Chinese buyer undertake during the spring .Instead they turned to drawing on inventories amid historic high prices and tight credit conditions.

Going forward the copper prices in 2012 will be determined by the inventory cycle of China and the economic data coming from the USA and Europe .According to the ICSG, the world copper usage for 2012 is expected to grow by 3.6 percent, mainly supported by a growth of six percent in China .However if we want to put a range to the prices of copper this year, it would be at USD 4000 at the lower end and USD 80000 at the higher end .According to Ahmed ,”My mining cost of  production  is USD 3000 per ton , but since we have fixed costs of other activities , it take it to around USD  4000 per ton “This is applicable  to almost 90 percent of the total producers  of copper around the world.

As far as the upper range of copper prices is concerned, we believe that it will be around USD 8000 per ton .This will result from the demand pickup in the latter half of 2012,as the US home sales data will improve further .Japan will start its comprehensive reconstruction  programming after  the  tsunami and most notably ,China’s power industry that solved its  technical problems in 2011 will once again start demanding more copper Ahmed agrees with this adds ,”I do not see it going above USD  8000 per ton ”.

Coming back to India, the country faces an imbalance between copper production and its smelting capacity .in 2010, India reefing capacity in 2010; India refining capacity was more than one million ton, which requires 100 million tons of copper  ore (assuming one percent of copper content).Compared to that we have mined merely 3.6 million tons of copper  ore. However the demands for copper in India is just o.6 million ton and the rest of the refined copper is exported .Hindustan copper is the only company in the listed space that is vertically integrated and percent in the entire value china of copper .In addition to this the order two major players that have major refining capacities are Sterlite and Hindalco industries.