Jun 21, 2010, MUMBAI (Dow Jones)--India's copper demand will likely grow at least 8% to 10% this fiscal year as corporates build power units to meet their electricity demands, said a top executive of India's third-largest copper producer Hindustan Copper Ltd. (513599.BY).
In the year to March 31, 2010, India produced 550,000 metric tons of copper. This fiscal year, the power sector is expected to grow more than 10%, said Shakeel Ahmed, managing director of the state-run company.
"A lot of projects are coming up due to shortage of power supply in the country," he said.
Almost half the country's red metal demand comes from power projects and the metal is used for transformers, wires and cables.
India's surging automobile sales and strong housing demand ensure copper demand wont be dented by prices that Monday had climbed 32% from a year earlier to $6,600 per ton internationally, boosted by a global recovery.
According to industry estimates, automobiles comprise of 8% of India's copper demand while housing comprises of 7%.
Copper demand in India will likely remain robust in the coming years because of the ramp-up of power production, housing and other infrastructure.
Still, India is unlikely to become a net importer of copper any time soon as major copper producing companies are expanding smelting capacities and local production should continue to outpace demand.
Among the major players, Vedanta Resources Plc plans to commission a new 400,000 tons per year copper smelter in 2011.
Also, India has a capacity to produce around 900,000 tons of copper annually and so the surplus refined copper is exported.
"This (fiscal) year, India will export around 300,000 tons of refined copper even as copper prices remain high," Ahmed said.
Ahmed said copper prices on the London Metal Exchange are expected to remain firm because of demand from China and are expected to trade around $7,000-$7,500 per ton by the end of 2010.
"China had tightened its purchases earlier due to high inventories. However, it can't afford to keep its growth rate low, so it will continue to purchase the metal," he added.
Prices may also rise as the U.S. seems to have put the worst of recession behind, Ahmed added.
Still, the global equity markets have been volatile following concerns over the Euro zone debt crisis and many countries are plagued by high inflationary pressures.
"Copper prices will closely track global equity markets and how China's purchases pan-out in the coming months," said Amar Singh, head of research with brokerage Angel Commodities.
"Copper demand looks very positive in India as all the sectors are doing well. However, physical buyers won't be comfortable buying above $7,500/ton levels," he added.