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Rise in metal prices hits medium, small units

Dhimant Bhatt

Copper wire bar, aluminium ingot & zinc slab prices have touched an all-time high
Small-scale units unable to buy raw material at current prices
This has created problems in executing export orders

Mumbai , Feb. 7

THE continuous rise in the prices of major non-ferrous metals — copper, aluminium, lead, brass and zinc — is beginning to impact businesses of medium and small-scale units.

In the virgin section, copper wire bar, aluminium ingot and zinc slab prices have touched an all-time high level of Rs 286, Rs 132 and Rs 136 a kg, respectively, in the domestic market following higher international prices.

In the scrap section, almost all the metals have also touched record levels due to demand-supply gap.

"All metals prices have gone up in last two years. Raw materials prices have risen almost three times in the last couple of years. The way prices are going up, most of the medium and small-scale units are losing their business," Mr Rohit Shah, President of The Bombay Metal Exchange, told Business Line.

Copper prices have risen to record highs.

The LME price of copper, which was around $2,425 a tonne in January 2004, rose to $4,600 in 2005.

Similarly, prices of other all metals have also gone up from January 2004, for example, price of aluminium increased from $1,600 to $2,200 a tonne in 2005.

Zinc and lead prices, which were around $1,000 and $700 in January 2004, shot up to $1,800 and $1,200 respectively in 2005.

In the domestic market, copper wire bar prices have gone up to Rs 286 per kg from Rs 265 a kg as on January 1.

Aluminium ingot prices have also moved up to Rs 132 a kg from Rs 120 a kg and zinc slab prices moved up from Rs 121 to Rs 136 a kg.

"Small-scale units are unable to buy raw material at the current high prices. Hence, most of the units are on the verge of closure and have started laying off workers and are waiting to sell their units to pay the workers and bank liabilities," Mr Shah said.

Most of the export orders could not be executed due to the heavy price rise in the international as well as local markets.

Majority of the exporters of brass handicrafts, building hardware and electrical parts/components are facing tough time in fulfilling their export obligations due to price rise, trade sources said.

"In Moradabad (Uttar Pradesh) and Jamnagar (Gujarat), more than 60 per cent of the units are sitting with huge idle capacity," he said.

For example, copper prices in the international market have moved up to $5,034 a tonne this week from average price of $4,735 a tonne in January.

As a result, the total cost of copper parts and components used in various industries have increased by Rs 20 a kg in just a couple of days, a trader said.

"Increase in prices have put great pressure on most industries like electrical, air-conditioning and heating, railway, telecom and construction as well all these industries are the major copper users," Mr Shah said.

"The Government should bring down customs duty on imports of all base from the current 10 per cent to zero level," Mr Shah suggested.

In a Budget memorandum, the exchange has also suggested that CVD should be brought down from 16 per cent to 8 per cent.

The trade has also recommended that customs duty on imports be charged on weight basis instead of value or current price formulas for brass scrap should be adopted for copper also.

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