The Global Copper Chase: From Blackouts to Bullion Bars
Across India and numerous other nations, police forces routinely launch operations targeting copper thieves. This criminal activity has escalated to such alarming levels that in the United States, the theft of copper electrical wires has directly triggered widespread power blackouts. However, the pursuit of this reddish metal now extends far beyond law enforcement. Investors have quietly entered the fray, propelling copper into the same intense price frenzy currently surrounding gold and silver.
Supply Squeeze and Industrial Impact
This escalating demand is creating a severe supply crunch, with market shortages worsening daily. The repercussions are being felt most acutely by industrial sectors. In Gujarat, a major manufacturing hub, engineering units, cable makers, submersible pump manufacturers, and brass parts producers are grappling with copper's critical role as a raw material. Copper's excellent electrical conductivity and corrosion resistance make it indispensable for the electric vehicle revolution and the broader clean energy transition.
An electric vehicle requires nearly four times more copper than a conventional petrol or diesel car. Furthermore, data centers, wind turbines, solar panels, and expansive power transmission networks all consume vast quantities of the metal. As demand consistently outpaces supply, copper prices have skyrocketed by approximately 48% over the past year. On the London Metal Exchange (LME), the global benchmark, prices surged from around $8,900 per tonne a year ago to nearly $13,000 per tonne in January.
Volatility and Business Challenges
"The rising price is not the only problem. Copper prices are highly volatile, which reflects in the final product cost and discourages buyers," explained Jasmat Santoki, promoter of PMC Wires in Rajkot, a manufacturer of copper strips, rods, pump cables, and industrial cables. He emphasized that higher prices necessitate greater working capital investment, create significant challenges for exporters, and cause domestic customers to delay their purchases.
Within the engineering sector, submersible pumps, especially those used in agriculture, represent the highest consumption of copper. Industry leaders acknowledge they can absorb temporary price increases, but frequent and sharp fluctuations severely disrupt business planning and operations. Copper constitutes nearly 30% of the raw material in these pumps, which are extensively used by farmers and real estate developers alike.
"The skyrocketing copper price has raised our production costs significantly. Customers are unwilling to accept higher prices, which directly affects our profit margins," stated Kamal Sojitra, executive director of Falcon Pumps in Rajkot.
The Brass Industry Under Pressure
Another major consumer facing strain is the brass parts industry, centered in Jamnagar with over 8,000 units. Brass parts typically use a composition of about 60% copper and 40% zinc. Jamnagar produces roughly 3,500 tonnes of brass parts annually, but demand has plummeted sharply. This decline is attributed to exorbitant raw material costs, a weak Indian rupee against the US dollar, and a noticeable slowdown in key European markets.
A Capital-Intensive Extraction Process
Copper mining ranks among the world's most capital-intensive and time-consuming industries. The journey from initial discovery to first production can span up to 20 years and requires colossal financial investment. Companies expend billions on geological surveys, regulatory approvals, land acquisition, drilling operations, and infrastructure development.
Global copper reserves are heavily concentrated in a few nations, including Chile, Peru, the Democratic Republic of Congo, China, and the United States. As ore grades decline and mining operations delve deeper, the volume of waste rock increases substantially. After extraction, the ore undergoes a water-intensive flotation process to produce copper concentrate, which is then shipped to smelters for final refining.
Retail Investors Enter the Fray
With gold and silver prices reaching record highs, retail investors in cities like Ahmedabad are increasingly turning to copper bars. They are betting that this industrial metal could experience a similar bull run. Several jewellers and bullion traders have begun offering copper bars to walk-in customers who find current silver prices prohibitive and are hesitant to invest in silver due to market volatility.
However, this new trade comes with a significant caveat: most sellers are not offering a buyback guarantee, leaving investors uncertain about their future exit options. Market sources indicate that several jewellers have been selling copper bars for about a month, but resale poses a major challenge as copper is primarily an industrial commodity without an established buyback mechanism with jewellers.
Taxation and Market Dynamics
The tax structure further complicates retail investment. Unlike gold and silver, which attract a 3% Goods and Services Tax (GST), copper is taxed at 18%, substantially raising the effective acquisition cost for buyers. Traders note that this higher tax rate, combined with the lack of a reliable buyback channel, makes copper bullion a fundamentally different and riskier proposition compared to precious metals, despite the recent surge in interest.
Nishant Dholakia, a city-based jeweller, reported that copper bars are being sold in both bullion-grade and commercial-grade categories, typically priced between Rs 1,600 and Rs 2,000 per kilogram, depending on grade and applicable taxes. He noted a sharp rise in enquiries, with approximately 600 kilograms sold at his shop alone in the last 20 days.
"Retail customers are buying with an investment motive, and the average purchase per buyer is around 20 kilograms," Dholakia said, adding that supply is primarily sourced from Mumbai, with some local availability. He emphasized that jewellers are being transparent about the liquidity issue, clearly stating they will not offer buyback for at least two years.
He anticipates that sustained industrial demand and continued investor buying will further tighten supply, potentially leading scrap traders to offer better rates in the future. "Scrap traders are currently offering buyback at around Rs 1,300 per kilogram, but investors who have bought at higher prices for the long term are unlikely to sell at a loss," he added. Inquiries for 1-kilogram copper bars remain high, with customers viewing them as an alternative investment to silver, with investments typically ranging from Rs 5,000 to Rs 20,000.
