New Delhi: India’s leading commodity exchange, where gold bullion has always dominated trading, is seeing the spotlight shifting to copper as demand for base metals picks up in the fast-growing economy.
The volume of copper being traded has more than doubled to 7,000 to 8,000 tonnes a day over the past one year with volatile metal prices prompting more users to hedge, Anjani Sinha, director of Multi Commodity Exchange of India, said.
“The trading in copper futures is now almost at the same level as gold,” Sinha told Reuters in an interview.
World copper prices have more than doubled to about $7,500 per tonne from $3,000 in end-2005, he said.
This has lifted copper futures trading on the Indian exchange to about 20-25 billion rupees ($488-$610 million), just behind gold futures with 25-30 billion rupees.
It is only a matter of time before copper overtakes gold as the most traded as more cable and electric wire makers, who contribute about 60 percent of the trading volume now, step in to buy copper futures contracts to hedge against price volatility.
“It may happen. There is a lot of industrial application and many users are there. And compared to gold, copper is more volatile,” Sinha said.
The potential for the copper futures market in India is huge, with an economy growing at more than 9 percent annually expected to boost usage of the base metal in telecommunication lines, power cables, house wiring and industrial equipment.
India’s top copper refiners including Sterlite Industries India Ltd. <STRL.BO> and Hindalco Industries Ltd. <HALC.BO> conduct all their hedging at the London Metal Exchange where the daily volume is about $6 billion.
Sinha said as volume in the Indian bourse picks up, it would lure these companies to participate.
“If the volume goes up to 15,000 to 20,000 tonnes daily, then they will also start. When they participate, there will be exponential growth,” he said.
India’s annual copper consumption is around 500,000 tonnes, of which 25,000 to 30,000 tonnes are imported.
Sinha said the daily volume of trading in other base metal futures contracts like zinc have surged to 10 billion rupees from 500 million at time of its launch in 2005.
Similarly, that of nickel has shot up to four billion rupees from 400 million in 2004.
“These volumes will go up further. The use of non-ferrous metals is increasing and their prices are volatile,” Sinha said. ($1 = 41 rupees) REUTERS