Taking advantage of the lower international prices, India turned out to be a net importer of copper so far in this fiscal. With the inventory keeps piling up at the global market place owing to the outbreak of Coronavirus in China-the major consumer of copper-the price of copper is set to fall further, which in turn see further rise in imports, said Care Ratings, in its study.
As of latest estimates, import share grew 29% to 280,000 tonne in the April-January period compared to 217,000 tonne in the same period last fiscal. The market share of imports increased to 51% in Q3FY20 vs 40% in Q3FY19, the study said.
According to Care Ratings, copper prices on the London Metal Exchange (LME) averaged $6,446 per tonne in April 2019 and $5,741 per tonne in October 2019. The outbreak of novel coronavirus in China again led to fall in prices. As the outbreak spread to more countries, it started to distort the demand-supply scenario.
Copper prices fell below $5,000 per tonne in more than three years in March 2020. On March 19, copper prices were around $4,685 per tonne on the LME.
The pandemic has impacted the production and demand for base metals. Inventory of copper at the LME and the Shanghai Futures Exchange (SHFE) has been on a rise.
Copper stocks at the LME warehouses, which stood around 147,000 tonne in December 2019, have risen to 231,000 tonne as on March 18. Copper inventories at SHFE stood at 377,247 tonne on March 20, up from 123,647 tonne in the end of December 2019. Higher inventory levels reflect poor demand, which has impacted prices of the metal, the study said.
With the global demand from the European, Middle East and the US markets likely to remain muted for the next one quarter, the prices of most of the base-metals may remain subdued, owing to significant demand-supply disruptions. Subsequently, the global copper prices are expected to remain in the range of $4,500-$4,900 per tonne, Care Ratings study noted.
Taking advantage of the falling prices and lower duties under FTA with Japan, downstream copper manufacturers in India preferred imported copper over domestic cathode. Japan accounted for 77% of total imports during the current financial year, mainly because of India's preferential trade deal with the country. There is 5% import duty on import of finished copper products but India enjoys preferential tariff of 0.9% on imports of cathodes from Japan under the FTA, the rating agency added.