November 8, 2012 / 12:36 PM / 5 years ago

OUTLOOK-India base metal demand seen up on festive push

MUMBAI, Nov 8 (Reuters) - Demand for base metals in India is likely to remain buoyant this fortnight helped by an e xpected rise in automobile sales during the o n going festive season and a spurt in construction activity following the end of the rainy season.

“Auto sales recovered in October and are likely to keep the momentum in November, and economic activities are also recovering in the third quarter of the current fiscal. All these factors are likely to boost demand for base metals,” said Surendra Mardia, president, Bom b ay Metal Exchange.

Demand for lead, mostly used for making batteries for vehicles, is being supported by higher October sales reported by automobile companies, said Ashwani Kumar Harit, an analyst with Religare Commodities.

Maruti Suzuki, India’s largest car maker, sold 103,108 units in October, up 86 percent on year. Sales of Tata Motors, another major Indian automobile maker, grew by 7 percent to 71,771 units in October.

The festival season is underway in India and will peak next week with Diwali and Dhanteras - occasions considered auspicious for buying new vehicles, consumer durables and bullion.

Car companies also offer discounts during the festival season and this could push up auto sales in November and consequently boost demand for lead in India, traders said.

India needs around 250,000 tonnes of lead every year to meet the growing demand for b atteries, while it produces around 80,000 tonnes only. The gap is met through imports, mostly from Australia and Latin America, according to Lead Zinc Development Association.

At 1225 GMT , lead prices in the Mumbai spot market were up by 0.2 rupee at 119.7 rupees a kg. The November lead futures contract on India’s Multi-Commodity Exchange (MCX) was up 0.08 percent at 119.15 rupees a kg.


Copper prices in the Mumbai spot market fell tracking the softness in the futures market and on reduced buying by smelters as most of them have already made festival season purchases.

Demand for copper and zinc in India has been rising due to a surge in construction activity after the end of the four-month long rainy season, Harit said.

India’s annual consumption of copper is pegged at around 580,000 tonnes, and growing at 7-8 percent per annum. However, compared with Asian rival China, which needs over 7.5 million tonnes, the demand is miniscule.

Copper in India is mostly used for making wires, with a capacity of less than 1,100 volts, and electrical equipment.

The metal is also used for making artefacts, and alloys like brass, whose demand rises during Diwali as Indians prefer to buy utensils and other brassware during the occasion, said D. De Sarkar, CEO of Indian Copper Development Centre, a society working for growth and development of copper-based industry.

Domestic steel production rose by over 2 percent in September, boosting demand for zinc, which is used as an anti-corrosive agent for construction materials, said Ravindra Deshpande, analyst with Elara Capital.

India, the world’s third-largest producer of zinc, exports around 215,000 tonnes, mainly to China.

The partially convertible rupee, which plays an important role in determining the prices of metal, fell 0.3 percent to 54.36 a dollar.

In the Mumbai spot market, copper fell by 10.4 rupees to 411.6 rupees per kg after rising sharply in the previous session, while zinc rose 2.25 rupees to 103.7 rupees per kg.

The key November copper contract on the MCX was trading up 0.13 percent at 415.75 rupees a kg after reversing early losses.

The contract hit a five-month low on Wednesday at 413.3 rupees, tracking a downtrend in global prices.

Three-month copper on the London Metal Exchange had fallen to a two-month low at $7,563.25 a tonne in the previous session. At 1139 GMT, copper on the London Metal Exchange was trading 0.71 percent down at $7591.75.

The November zinc contract was trading up 1.03 percent at 102.8 rupees per kg. (Reporting by Deepak Sharma; Editing by Sunil Nair)

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