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Mining industry

Copper Prices Reach 27-Month High Amid Global Supply Chain Constraints

Strategic Insights

— 1 min read

Copper prices have hit a 27-month high due to supply chain constraints, a weak dollar, and potential exchange-traded fund flows into copper. This price spike is expected to inflate the costs of power equipment, primarily due to the high copper content, which accounts for 25% of the total cost. Integrated companies like Hindustan Copper are likely to benefit from the high London Metal Exchange price. However, copper smelters such as Hindalco Industries and Sterlite Industries may not gain from the price hike.

Key Takeaways:

  • Copper prices have reached a 27-month high due to supply chain constraints, a weak dollar, and potential exchange-traded fund flows.
  • The price spike will inflate the costs of power equipment, with copper content accounting for 25% of the total cost.
  • Integrated companies like Hindustan Copper are likely to benefit from the high London Metal Exchange price.
  • Copper smelters such as Hindalco Industries and Sterlite Industries may not gain from the price hike due to inflation costs.
  • The Indian Electrical Equipment Manufacturers Association (IEEMA) estimates that the 13% increase in copper prices will lead to an almost 13% increase in the final cost.
  • Tight copper supplies, caused by a shift in investments from currencies, are expected to keep prices firm.
  • The US dollar index fell 0.7% on concern that the Federal Reserve's bond-buying programme will fall short of expectations.
  • Sterlite Industries' Tuticorin plant is temporarily shut down due to pollution violations, impacting India's copper usage.
  • Workers at Anglo American and Xstrata's Collahuasi copper mine in Chile are in wage negotiations.
  • Large financial services major JPMorgan is planning to float an exchange-traded fund (ETF) for copper.

Statistics:

  • Copper for delivery in three months was $8,342 a tonne on the London Metal Exchange (LME), up 0.5%.
  • The US dollar index fell 0.7% on concern that the Federal Reserve's bond-buying programme will fall short of expectations.
  • The price of copper has risen to $8,342 from $8,500 last week.
  • Copper prices were at $8,900 per tonne in July 2008, before the global liquidity crisis.
  • The Indian Electrical Equipment Manufacturers Association (IEEMA) estimates that the 13% increase in copper prices will lead to an almost 13% increase in the final cost.
  • Copper content in power equipment accounts for 25% of the total cost.

Sources:

  • Shakeel Ahmed, chairman of Hindustan Copper.
  • Indian Electrical Equipment Manufacturers Association (IEEMA).
  • London Metal Exchange (LME).
  • Times of India.
  • JPMorgan.
  • BlackRock.

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