PMEX Copper Report

7/27/2019 PMEX Copper Report

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PMEXCopper Futures

September 2013

Pakistan Mercantile Exchange Limited9th Floor, PRC Tower, 32-A Lalazar Drive, MT Khan Road, Karachi.

Voice: +92 21 111 623 623, Fax: +92-21-5611263, 5610505Email: [email protected] , website: www.pmex.com.pk
mailto:[email protected]:[email protected]:[email protected]://www.pmex.com.pk/http://www.pmex.com.pk/http://www.pmex.com.pk/http://www.pmex.com.pk/mailto:[email protected]


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INTRODUCTION

Copper is one of the oldest known metals being used by humans. Copper is ductile,

corrosion resistant and most importantly an excellent conductor of heat and electricity.Copper s chemical, physical and aesthetic properties make it a material of choice in awide range of domestic, industrial and high technology applications.

Copper is a fairy common element yet all the copper present on earth is not economicallyextractable. According to U.S. Geological Survey reported a current total reserve base ofcopper in potentially recoverable ores is 1.6 billion tonnes, of which 950 million tonneswas considered economically recoverable.

Copper is also one of the most recycled of all metals. Recycled copper (also known as

secondary copper) cannot be distinguished from primary copper (copper originatingfrom ores), once reprocessed.

GLOBAL COPPER SCENARIO

The demand for copper continues to grow as the world refined usage has tripled in last50 year. Main consumption of copper is by the sectors such as electrical and electronicproducts, construction, transportation and consumer products.

There has been steady growth in the copper mine production in the recent years and thisyear the expected production levels are around 17.5 million tonnes which were close to16 million tonnes in year 2011 i.e. over 9% growth in two years.


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Refinery production is expected to be around 21 million tonnes this year which was 19.6million tonnes in year 2011 i.e. 7.5 growth. Almost 3.6 million tonnes has come fromsecondary copper production (copper recycling). The largest producer of mined copper isChile, which produces around 33% of the word mined copper whereas China has thelargest refining capacity of copper ore and is currently producing more than 26% of therefined copper.

The usage of the refined copper is expected to increase by 4.1% this year compared toyear 2011. The expected usage is around 20.6 million tonnes in 2013 which was 19.8million tonnes in 2011. China is the biggest consumer of copper with 40% consumption oftotal global refined production.

Copper Trading:

Major product categories of copper traded internationally include:

Copper concentrates Copper blister and anode Copper cathode and ingots Copper scrap

Changes in domestic policies by large producers e.g. export quotas are most impactfulalso import duties and sanctions enforced by major consumers affect the internationaltrade.


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Copper Futures Trading:

Copper is one of the most actively traded commodities on futures exchanges. It is listedon various exchanges around the world but following exchanges contracts are used aspricing benchmarks in the global trade.

1. London Metal Exchange (LME).2. New York Mercantile Exchange (NYMEX), a division of CME.3. Shanghai Metal Exchange (SHME).

Other than the above exchanges, copper has also been traded successfully on thefollowing exchanges:

1. Multi Commodity Exchange India (MCX).

2.

Dubai Gold & Commodities Exchange (DGCX).3. National Commodity & Derivative Exchange India (NCDEX)4. Johannesburg Stock Exchange (JSE).

Factors Affecting International Copper Prices

Global economic climate. Energy: coal is the fuel chosen to power main copper mines and processes, and

stringent climate change policies increase costs and therefore prices. Recourse Nationalism.

Labor Policies. Peace and security is also a key factor. Rate between imported inputs and domestic input costs affected by the currency

strength of the producer.

Price: US Dollars per Pound


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PAKISTAN

Pakistan has decent amount of copper reserves but due to political and some

operational issues the extraction is not at its full potential. Pakistan has no refiningfacility and most of the extracted ore is being exported to China. In year 2011 almost 11thousand tonnes of copper ore had been exported. Pakistan fulfills its demand mostlyfrom import of copper cathodes and by recycling the copper scrap.

Majority consumption of copper in Pakistan is in following sectors: Electrical Appliances i.e. electrical motors, fans, washing machines etc. Electrical Cable Manufacturing. Construction.

There has been an extraordinary hike in the imports of copper in last decade, almost 38

times which symphonize the growth of the electrical and other associatedmanufacturing sectors in Pakistan.

Source: Pakistan Statistical Year Book 2012

MANUFACTURINGFOUNDARYIMPORT

FINISHED PRODUCTSSCRAP

REFINED COPPER SEMIS

RECYCLING


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PMEX COPPER FUTURES

Keeping in view the importance of Copper in both global and domestic economy,PMEX is in the process of listing copper futures contract based on the prices of CME

Copper Futures Contract.The contract will be cash settled in Pak rupee, however the price quotation will be in USdollars, which will provide the local market participants an international flare and easeof trading as the copper is not only quoted in US dollars but most intl deals are pricedin US dollars as well.

The key market players i.e. hedgers, investors and speculators play their important anddue role for the success of any futures market. As explained earlier the majorityconsumption of copper in Pakistan is by electrical sector i.e. electrical cablemanufacturers, electrical appliances manufacturers etc. are the potential hedgers. Alsothe power companies i.e. KESC, Wapda place their orders of high power transmissioncables and other electrical instruments on international prices of copper so they couldalso benefit by conveniently hedging themselves.

It will attract those investors as well who are currently trading copper futures throughunregulated forex houses. PMEX will provide them a safe, secure, transparent andconvenient trading platform. Currently these forex houses transmit huge sums offoreign exchange to their foreign counterparts to enable their local investors to trade incopper or other commodities. As these houses are not regulated by any authority, at

times they close their operations and disappear, depriving investors of their money.


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Appendix

Sources:Pakistan Statistical Year Book 2012International Copper Study GroupCopper Development Association Inc.

Documents

PMEX Copper Report