Even as the markets and the rupee are in a free fall, the sharp drop in global commodity prices on Thursday has come as a relief in an otherwise gloomy environment . Prices of major industrial commodities including steel, copper and aluminum have declined in the past few months offering some succour to companies hit by high costs and slowing growth.
While copper prices have declined by about 15.4% to around $8,000 per tonne in the international market so far in 2013, prices of steel billets plunged 55% to $125 per tonne during the same period. In fact, India turned a net importer of steel in May despite weak demand due to the sharp fall in international prices.
But market observers see limited gains from the decline in commodity prices for companies as it has been offset by a weak rupee making imports costlier. "The gains would be quite limited. Our landed costs would be higher because of the depreciating rupee," analysts tracking commodities said.
The country has become a net importer of 1.61 lakh tonnes in May from a net exporter of 1.05 lakh tonnes in April. Steel prices have declined by about 2% in the domestic market in the past three months compared to the 15% fall in the global market for the period. Steel imports went up as the gap between local and global prices narrowed.
Prices of other commodities that have industrial applications — including nickel , lead and tin too — have fallen in the current year. "Commodity prices have fallen because of weak Chinese demand," said C P Krishnan, whole-time director, Geojit Comtrade. China is the largest consumer of most industrial commodities. "The (commodity ) market has turned nervous due to the sluggish demand," Krishnan said.
