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2013

NILESH SOMAN

The Key Notes Financial Opiniery Pvt. Lt

30/01/2013

COPPER OUTLOOK

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Copper (Cu)

About Copper:

Copper is a natural elementa metal that has been one of mankinds most usef

and valuable materials. It is represented by the chemical symbol Cu and the

atomic number 29.

Copper is also an essential nutrient that is required all higher life forms. It is

essential component of dietary nutrition that enables the body to metabolizeenergy and function properly. As with humans, plants and animal health rely o

adequate copper intake. The worlds 2 most important food crops --- rice and

wheat are both highly dependent on sufficient copper in soil. Copper has been

indispensable to human progress. In fields ranging from medical equipment to

energy efficiency from jet planes to satellites from television to the internet.

Copper is vital to our well being in day to day life.

Copper is by far the most sustainable gift of natures bounty. For as long as

humans have put copper to use, they have taken advantage of the fact that it is

virtually 100% recyclable. It has always made economic sense to retrieve as mu

copper as possible from a product at the end of its life cycle and reuse it for som

new purpose. Moreover, most copper is use such as roofing; wiring and plumbiwill remain in use for over half a century.

Copper has the ability to acquire additional features like hardness, tensile

strength & much greater resistance to corrosion. Its key property is the fact tha

is an excellent conductor of electricity. Copper can be utilized in various

applications and across industries.

Main Uses of Copper:

Its main use is for the production of cable, wire and electrical products.

Construction industry accounts for the second largest usage in areas like buildi

wire, pipes for plumbing, heating & ventilating and sheet metal facings.

Key Applications as per European Copper Institute:

1. Electricity & Energy

2. Aquaculture

3. Antimicrobial Copper

4. Telecommunications

5. Architecture

6. Plumbing & Heating

7. Rational Use of Energy

8. Renewable Energy

COPPER OUTLOOK 2012

Copper was the first mineral that man

xtracted from the earth and along with tin

ave rise to the Bronze Age.

China is the worlds locomotive.

opper is its partner in development.

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Copper Fundamentals:

Demand for Copper:

The outlook for copper is greatly focused on china. Copper consumption will grow

a consequence of overall economic growth. China has been a shining example of

overall economic growth, growing at an annual rate of 8.0% between 1980 & 2010

Most forcast do not have china slowing down anytime soon; the IMF predicts chin

economy will expand at an annual rate of 9.7% over the next 5 years.

Huge spending on copper intensive power infrastructure on the grid in rural areas

continue through 2012. Beijing has also renewed the home appliance subsidiary

scheme and is promoting electric cars which are twice as copper intensive as

conventional vehicles.

Key Drivers:

1. Overall urban population increases.2. 221 Chinese cities will have over 1 million people (Europe has 35 cities w

over 1 million people).

3. Along with those massive increases, increased demand will be seen forbuildings & transit.

4. It is more people, more buildings or more instracture, more copper will bneeded to facilate construction.

5. One of the largest drivers of copper will be the growth of the Chineseconsumers.

Supply for Copper:

1. Discoveries of higher grade deposits are becoming less frequent.2. Declining average grades.3. More underground mines are producing copper at a smaller output capa

than open pits.

4. Greater country risks and infrastructure challenges.5. Inadequate exploration funding.

The reason why the prices are holding up so very high is that there has b

only marginal increases in new copper mine development over the past

years. The trends in global refined copper consumption are also progress

to an alarming state. Industrial production is not keeping up with copper

consumption & recent indication have pointed to estimates in Chinese

consumption to be very conservative. It now appears that in the next 25

years, the world will need to produce as much copper as has been produ

in the history of humanity.

Global Copper Production Share

42

28

12

99

World Copper

Production

Electrical

Construction

Transportation

Consumer

Indsutrial

Machinery

Industrial Consumption

42

28

12

99

Industrial

Consumption

Electrical

Construction

Transportation

Consumer

Production Consumption

2001 325 293

2002 374 301

2003 391 307

2004 419 335

2005 518 397

2006 627 407

2007 719 475

2008 669 500

ndia Copper Balance Sheet (000 Tonnes)

urce: LME, World Bureau of Metal Statistics

ource : LME Standard CIB Global Research

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INDIAN COPPER INDUSTRY:

The history of Indian copper industry goes back to 1967 with the

incorporation of Hindustan Copper ltd (HCL) and thereafter acquisition o

mines from public sector National Minerals Development Corporation

(NMDC). The Indian copper industry was opened for private sector

investment in 1992. Earlier the industry was dominated by Hindustan

Copper Limited (HCL), a public sector undertaking. The industry currently

has just 3 major players like Sterlite Industries, Hindalco Industries ltd, a

Hindustan copper Ltd. HCL is the only integrated producers who process

both indigenous and imported copper concentrated to produce end

products like copper bars, rods and wires. HCL was incorporated in Nov

1967 with the objectives, inter alia, to carry out mining operations and

produce copper and related products. HCL subsequently took over the

copper ore mines from NMDC. These mines are located at Khetri and

Kolihan in Rajasthan and Rakha Copper complex in Jharkhand. Till 1997,

only producer of primary refined copper was HCL. The installed capacity

refined copper plants was around 47.5 ktpa which used to meet

approximately 25-30% of Indias requirement for refined copper. The

balance demand was met through imports. The other 2 producers of

copper in India are Hindalco and Sterlite. Their present annual capacities

500 ktpa and 405 ktpa respectively. Their plants are based on importedcopper concentrate.

The copper industry is highly dependent on the performance of & dema

for products like power and telecommunication cables, transformers,

generators, radiators and other ancillary components. Hence its growth

closely linked to the countrys economic and industrial growth. Although

industry is capital and power intensive, entry barriers are moderate. The

basically relate to economies of scale, access to ore supplies and

environmental issues. In India, copper reserves are mainly concentrated

Bihar, Rajasthan and Madhya Pradesh and only HCL has been allocated a

these mines having a copper content of just 1.2-1.3% against the world

average of 2-3%. Private copper producers including Hindalco Industriessterlite Industries, however, import concentrate and then produce refin

metal.

Distribution of Indian Copper Industry: (Source: Metal World)

36

209

9

6

812

Distribution of Indian Copper

Industry

Electrical

Telecom

Engineering

Construction

Consumer Dur

Transports

Others

he Indian industry can be classified into two

oad categories--- Manufacturers of refined

pper (copper cathodes) and manufacturers

copper products.

ven after 40 years of competition, Copper

maintaining a 40% share of the car

diator market.

he total installed capacities for copper

ndia are presently around 947.5 ktpa.

With the increasing shift from fixed line to

reless mode of communication, there is a

eat for demand growth for copper from

s se ment.

At Present, the demand for copper for

primary copper production is met through

wo sources i.e. copper ore mined from

ndigenous mines and imported copper

oncentrates.

The per capita consumption of copper

in India is currently at 0.4 kg per annumwhich compares poorly with Chinas per

capita consumption of 3 kg per annum.

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opper Surprises :

The Euro coin to be introduced in

2002 is an excellent example of how

copper coins have managed to

perpetuate in the wake of

technological advancement.

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Copper Recycling:

Copper is among the few materials that do not degrades or lose their chemical or

physical properties in the recycling process. Considering this, the existing copper

reservoir in use can well be considered a legitimate part of world copper reserves. In

recent decades, an increasing emphasis has been placed on the sustainability of mate

uses in which the concept of reuse and recycling of metals plays an important role in

material choice and acceptance of products. If appropriately managed, recycling has

potential to extend the use of resources and to minimize energy use some emission a

waste disposal.

Closing metal loops through increased reuse and recycling enhances one of the key

elements of societys transition towards more sustainable production and consumpti

patterns. It is widely recognized that recycling is not in opposition to primary metal

production but is a necessary and beneficial complement.

ICSG estimates that 35% of copper consumption came from recycled copper. Some

countries copper requirements greatly depend on depend on recycled copper to mee

internal demands. However, recycled copper alone cannot meet societys needs, so w

also rely on copper produced from the processing of mineral ores.

ource: International Copper Study Group

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ernational Copper PricesCopper Market Forecast 2012-2013:

For 2012, International Copper Study Group data projections indicate de

of about 2, 50,000 metric tons as supply growth will continue to lag behi

demand growth. For 2013, however increased production and lower gro

in demand are expected to yield a nearly balanced market.

In developing its projections, the international Copper Study Group

recognized that numerous factors including a world economic slowdown

European Union sovereign debt issues, political disturbances in the Midd

East and North Africa and market price volatility create significant

uncertainty and that the global market balances could vary from those

projected. Secondary refined production which is anticipated to increase

5% in 2012.

For 2013, world usage is expected to grow by 3.6% mainly supported by

growth of 6% in china as the rest of the world is expected to grow by onl

2%.

Global Forecasts: Copper Production & Consumption Imbalance

2010 2011 2012 2013 2014 2015 2016

World

Refined Cu

Production

18816 19583 20565 21928 23218 24021 2521

Y/Y Change 2.6% 4.1% 5.0% 6.6% 5.9% 3.5% 5.0%

World

Refined Cu

Consumption

18598 19476 20912 22067 23245 24256 2532

Y/Y Change 5.3% 6.2% 5.9% 5.5% 5.3% 4.3% 4.4%

Global

Balance

218 -163 -348 -138 -27 -235 -110

Copper Price

LME cash

(c/lb)

315 330 390 410 380 360 360

Source: International Copper Study Group

Technical Outlook for Copper: Range from 390-480.

Source: www.metalprices.com,

Source: www.metalprices.com

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Copper Market is forecasted to remain in deficit for Financial Year 2012.

EGIONS

100 TON)

MINE PRODUCTION REFINED PRODUCTION REFINED USAGE

2010 2011 2012 2010 2011 2012 2010 2011 2012

Africa 1,215 1,350 1,619 859 996 1,188 285 285 301.America 1,915 2,080 2,353 1,690 1,661 1,833 2,182 2,230 2,279

Latin

America

7,031 6,985 7,727 3,897 3,917 4,048 646 628 657

Asean-10 1,087 851 786 534 569 573 748 758 772

Asia ex

sean/CIS

1,626 1,655 1,741 7,558 7,806 8,301 11,052 10,990 11,55

AsiaCIS 491 474 501 413 440 497 96 101 101

EU-27 758 784 792 2,624 2,704 2771 3,348 3,346 3,362

Europe

Others

826 836 847 1,035 1,086 1,119 897 1,198 1,223

Oceania 1,030 1,084 1,246 424 498 510 131 140 141

TOTAL 15,979 16,098 17,612 19,035 19,676 20,480 19,386 19,676 20,39

djustment for Primary Feed Shortage 1/- - 110

lowance for Disruption 2/- - 91 - 704

World 15,979 16,098 17,612 19,035 19,475 20,136 19,386 19,676 20,39

Change 0.5% 0.7% 9.4% 4.2% 2.3% 3.4% 7.1% 1.5% 3.6%

efined Production Usage Balance -351 -201 -256

ote : China the leading global consumer of copper , apparent copper usage is based only on reported data(production + net

ade +/- SHFE stock changes +/- industry stock changes, if reported) and does not take into account changes in unreported

ocks(State Reserve Bureau (SRB), producer, consumer and merchant/trader), which may be significant during periods ofocking or de-stocking.

ource: International Copper Study Group, Copper Market Forecast 2012.