Copper: Price of volatility for the downstream sector

That copper prices have touched historical highs in 2025 on the Multi Commodity Exchange has not created the same ripple as those created by gold and silver. While silver and gold prices have shot up by 150% and 75% respectively, copper, too, has skyrocketed by 63%. Prices have increased from around Rs 793.85 per kg on January 1, 2025, to Rs 1,292.50 on January 1, 2026, with such significant gains last seen only in 2021,  when copper prices went up by 35.3%.

After hitting peak levels of Rs1,480.30  on January 29, 2026, copper prices, however, experienced intense volatility and faced significant correction, with February contracts dropping to around Rs1,284.50  to Rs 1,292 per kg by February 2-3, 2026, a drop of roughly 15-18% from the high of 63% experienced last year.

Such volatility in copper prices has significant impact on India's downstream sector, which uses copper as a raw material. Rising prices results in inflated production costs, which erodes profit margins for manufacturers in the electrical, automotive, renewable energy and infrastructure along with a host of other industries.

Age-old dilemma 
While upstream producers such as Hindustan Copper and Hindalco have enjoyed stock rallies on the back of record-high prices, downstream manufacturers continue to wrestle with the familiar “price pass-through” dilemma, whether to pass rising input costs to customers or absorb them through tighter cost optimization.

Vedanta’s share price too has seen a notable uptick, reflecting investor optimism around its expanding copper portfolio and the broader bullishness in the metal cycle. The divergence highlights how the current copper rally is rewarding resource-holders far more than value-added fabricators further down the chain.

Balancing these decisions is particularly challenging in price-sensitive markets or in areas where demand elasticity is high. In such markets even a slight price hike results in customers shifting their loyalty to more cost-competitive manufacturers, resulting in lower total revenue despite higher profit per unit.

For those heavily dependent on copper as raw material like wires, cables, electrical components, plumbing and HVAC components, the challenge is in terms of margin pressure leading to  reduced profitability. Moreover, any decision to increase prices to offset rising costs could feed into broader consumer inflation into the country—higher Consumer Price Index-- or reduced demand.  

Small and medium enterprises (SMEs) are especially vulnerable, because they lack both financial muscle and hedging tools available to larger corporations. They are vulnerable to spot market spikes, which can derail production timelines and sometimes  even stoppages when working capital is tied up in expensive inventory. SMEs also have limited negotiating power with suppliers and customers, making it difficult to absorb price swings without materially affecting profitability.

In the renewable energy and infrastructure spaces, volatile copper costs have led to budget revisions and longer procurement cycles. In January 2026, the Coimbatore District Small Industries Association (CODISSIA) alleged "cartelisation" by traders, which had resulted in nearly 20% surge in domestic prices for critical raw materials.

Undermining the “ Make-in-India” goal
Indian fast-moving electrical goods (FMEG) exporters – manufacturers of cables, fans, pumps etc.-- could lose competitive edge if copper prices spiral. And if domestic supply tightens because of low production, exporters may either pay a premium for copper or scale back shipments for exports. Reduced exports would undermine “Make in India” goals in electrical manufacturing.

The Electronics Manufacturing Services (EMS) industry, which manufacturers  high-reliability PCBs, defence electronics, and consumer electronics also uses copper intensively. Often working on thin margins, higher copper cost may force these players  to accept reduced profitability or renegotiate contracts. Moreover, uncertainty around copper both in terms of cost and supply could delay investments in new facilities for PCBs, motors, compressors, etc., slowing the overall EMS sector.

Indian industry, already facing an acute copper supply squeeze. has been further burdened by the new quality-control order (QCO) on copper imports. In late 2024, the Ministry of Mines tightened norms on the import of cathode, mandating certification by the  Bureau of Indian Standard (BIS) effective from December 1, 2024.

Supply chain stress
Major suppliers,  notably Japanese producers supplying  nearly two-third of India’s refined copper, have been unable to clear this bureaucratic hurdle, triggering a sharp import drop. Companies had already warned that shipments halted in mid October 2024 to beat the quality-control order deadline could result in  a 90-day pipeline gap, which could see a shortfall of 100,000 tons of metal from January onward. The result: higher copper prices and fears of halted production in wires, cables, appliances, and other electrical goods.

Meanwhile. domestic refined output at 555,000 tonnes/year is already well short of consumption of 750,000 tons per year, resulting in roughly 40% of imports--360,000 tonnes in FY2023 24. The closure of Vedanta’s Sterlite smelter—once supplying nearly 36% of India’s refined copper—has become the critical choke point in the sector.

Its absence has widened the demand–supply gap, pushed industries toward costly imports, and intensified domestic price volatility. As a result, the copper upcycle is benefiting upstream miners while leaving downstream manufacturers under mounting pressure.

Rising  copper prices have manifold adverse impact on the industry. It exerts direct cost pressures, impacting a firm’s financial flexibility, its ability to invest in growth. It can also strains supply chains and result in import challenges. The cost of inaction (or delayed policy fixes) will result in companies bleeding profit growth and investment returns that are hard to recoup later.

Dr. Aruna Sharma, Former Secretary, Steel, Government of India, and, Practitioner Development Economist.