Copper demand remains a key parameter to gauge for economic activity and hence is is one of the most important commodities in the financial market. The Indian domestic growth has remained strong and copper demand in the country too has remained firm.
Not surprising Hindustan Copper Ltd share price has almost doubled during the calendar year 2023, while copper refiners such as Hindalco Industries has seen its share price rise more than 20% during the period.
Nevertheless, on the Global front the demand growth has remained muted (around 2% in 2023 as per ICRA estimates). While the global copper demand was expected to get a boost by the opening up of China economy post easing of Covid-19 curbs at the start of 2023, the same however did not happen leading to disappointment. In the meanwhile, rising interest rates led to global growth concerns and slowdown in the developed countries meant that copper demand did not see much uptick leading to prices also remaining rangebound. Copper prices on the London Metal Exchange have seen just 1.2% rise during the calendar Year 2023 till date.
As the analysts remain watchful on the global demand, the copper prices are also likely to follow the same.
Nevertheless, the outlook for domestic growth remains strong. The Reserve Bank of India also has raised the GDP forecast to 7% for FY24 and given a robust growth projection for FY25. The Copper demand is likely to follow suit.
Domestic refined copper demand growth is expected to remain healthy at 11% in FY2024 and FY2025, outpacing the rate of global growth in copper demand, said rating agency ICRA.
The infrastructure thrust of the Government of India is one of the key reasons for this growth since about 40% of copper demand is domestic demand is driven by construction and infrastructure sector . The automobile and consumer durable sectors that are growing well consume 11-13% each . Meanwhile higher conversion to renewable energy and growth in Electric Vehicles also remains supportive for copper demand.
Jayanta Roy Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA said that “significant emphasis by the government of India towards the smart city programme, the defence sector as well as the expected higher penetration of electric vehicles and its associated infrastructure bode well for the domestic demand outlook”.
Lower production of refined copper in India results in a deficit situation in the domestic market, which is being met through higher imports. The refined copper imports increased by ~30% in FY2023 and ~180% in H1 FY2024. However, a new copper smelter of 0.5 million MT (mmt) by the Adani Group is expected to start from FY2025 onwards which, once stabilised, is likely to reduce the deficit situation to an extent, said ICRA.