MUMBAI: Copper and crude oil, two important industrial raw materials for several industries, are on a tear. According to notes from Vedanta and ICICI Securities, a combination of factors like tightening mine supply, especially from Chile, shifting global trade flows amid potential US tariffs on refined copper, and accelerating demand from electrification, renewable energy, power infrastructure and AI are behind the recent rally in copper prices.For crude prices, the rally is mainly on the back of rising geopolitical tensions in the Persian Gulf region, one of the major sources of crude oil and gas globally.
Coming at a time when the economy is facing a sluggish demand environment, the rise in prices of these commodities is raising fears that several companies may have to either go for a price hike or absorb higher costs, squeezing profit margins. If crude prices sustain near or above the $100 mark, that could also add to the inflationary pressure, raising chances of a rate hike by RBI.On Tuesday, on London Metal Exchange (LME), copper three-month futures hit a high of $14,617/tonne, an all-time high. And in the international markets, Brent crude inched closer to the $100/barrel mark while the Indian crude basket, the biggest import item for the country in terms of value, went past the $100 mark early this month.The rally in prices of these commodities is also attracting investors to buy stocks of companies that are going to benefit from higher prices. On BSE on Tuesday, among the copper miners and producers, Hindustan Copper closed about 4.7% higher, Vedanta closed 1.3% up while Onix Solar, MSCTC and Bhagyanagar India, all three stocks, closed 5% up. Among the oil stocks, while Oil India closed 2.1%, ONGC closed 1% up.While the rally in copper is positive for Indian producers and miners of the metal, this could, on the other hand, increase input costs for sectors like real estate, cables & wires, electrical & electronic equipment, and power production, transmission & distribution.A report by real estate consultancy firm Anarock Property Consultants noted that due to the war in West Asia, mechanical, electrical & plumbing (MEP) costs in the real estate sector have risen by 8-12%, part of which is attributed to the rising prices of copper. In the last one year, the price of the metal has risen about 17%.