In the intricate web of economic indicators, copper demand emerges as a crucial barometer, holding significant sway over market dynamics. Particularly in India, the festive spirit of economic growth is mirrored by robust copper demand, underscoring the metal’s pivotal role in the financial landscape.
The domestic economic landscape in India has remained robust, contributing to a steadfast demand for copper. Notably, Hindustan Copper Ltd has witnessed an impressive surge in share price, nearly doubling in the calendar year 2023. Similarly, Hindalco Industries, a prominent copper refiner, experienced a commendable share price increase exceeding 20% during the same period.
Contrastingly, the global scenario presents a more muted picture, with a modest 2% growth in copper demand estimated by ICRA in 2023. Expectations of a demand surge following China’s economic resurgence post-Covid-19 restrictions were dampened by unforeseen circumstances, including global growth concerns spurred by rising interest rates and a slowdown in developed countries. Consequently, global copper prices have seen a restrained 1.2% rise on the London Metal Exchange during the entirety of 2023.
As analysts maintain a vigilant stance on global demand trends, the trajectory of copper prices is poised to align accordingly.
However, on the domestic front, the outlook remains optimistic. The Reserve Bank of India has raised the GDP forecast for FY24 to 7%, with robust projections for FY25. This positive economic sentiment is anticipated to resonate in copper demand.
ICRA predicts a healthy growth of 11% in domestic refined copper demand for both FY2024 and FY2025, outpacing the global growth rate. This optimistic outlook is attributed to the Indian government’s robust infrastructure initiatives, with the construction and infrastructure sector alone driving 40% of domestic copper demand. Additionally, the thriving automobile and consumer durable sectors, each contributing 11-13%, play a pivotal role.
Furthermore, the push towards renewable energy and the burgeoning Electric Vehicle market add a supportive dimension to copper demand. Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings at ICRA, notes that the government’s emphasis on the smart city program, the defense sector, and the anticipated surge in electric vehicles and associated infrastructure all contribute favorably to the domestic demand outlook.
Despite this buoyancy, India grapples with a deficit in refined copper production, leading to increased imports. Refined copper imports escalated by approximately 30% in FY2023 and a staggering 180% in H1 FY2024.
To address this, the Adani Group’s upcoming copper smelter, expected to commence operations in FY2025, holds promise in alleviating the domestic deficit situation. Once stabilized, it is anticipated to contribute to a more balanced market scenario.
