Industrial unrest in distant Chile seems to spell good times for Indian copper exports and provide the much needed fundamental support.
KOLKATA: Industrial unrest in distant Chile seems to spell good times for Indian copper exports and provide the much needed fundamental support after the global meltdown in base metal markets on Monday.
Scenarios of a global shortage, sparked by industrial strike at BHP Billiton’s Escondida copper mines in Chile, fuelled a fierce bull run in prices of the commodity and its subsequent resolution last month weakened the market following profit bookings by hedge funds. But news trickling in of fresh industrial unrest, once again at Billiton’s Spence copper mines in Chile, may be able to boost sagging copper prices at the London Metal Exchange (LME).
This can only be good portent for Indian copper producers like Sterlite Industries and Hindalco Industries, with the country for the first time poised to export around 4.5 to 5 lakh tonne of copper in 2006-07, outstripping total domestic consumption forecast at 4 lakh tonne.
Sterlite Industries, which has converted its smelter at Tuticorin into a 100% export oriented unit, is expected to ship its entire production of around 3 lakh tonnes overseas .
On Monday, spot cash price of copper at LME crashed to $7,520 per tonne after opening at $7,820 and hit the entire base metal market hard, pulling down aluminium to $2,535 per tonne after opening at $2,637, as hedge funds booked profits.
But, officials at Hindustan Copper Ltd, which is a pure domestic player, and Sterlite Industries said that global copper stocks at LME warehouses also fell by 3,625 tonne to 121,525 tonne, equivalent to just three days of global consumption. This, along with news of fresh workers’ strike at Spence mines, was expected to provide support to the short-term weak copper markets.
Of course, BHP Billiton’s Spence mines are not yet operational, but analysts said that a strike would affect long-term fundamentals on the global supply side, and in turn fuel prices.
Analyst William Adams has been quoted as saying, “given that funds jumped in last week, and consumers too are getting active, we can expect metals to remain well underpinned, if anything head higher.”
“Although the Spence mines are not operational, a strike can delay production and hence tighten up fundamentals,” Adams said.
Fears of global shortage in copper, coupled with rising demand in Asia, sent prices spiralling from an average of $4,734 per tonne in January 2006 to $8,021 per tonne in May 2006 when workers at the Escondida mines struck work. It peaked at $8,070 per tonne at the LME on August 10 but thereafter weakened steadily to $7,595 per tonne as BHP Billiton reached a settlement with the mine workers.
Subsequently, as hedge funds booked profits at the peaks, copper prices started consolidating at lower levels, hinting at end of party for Indian exports as export realisations in 2006-07 threatened to lose momentum of the earlier months.
But, after news of another strike at Spence came in on Monday, integrated copper producers anticipate a renewed bull charge that can protect export realisations in the next few months.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}