Copper at $13,000: How Copper Importers Can Achieve Cash Flow Optimization

Copper importers are seeing a price point of $13,000 per metric ton on the London Metal Exchange (LME). This marks a record high price point for copper and creates heightened levels of volatility for global commodity markets. Although copper is traded as a commodity, it also has a direct impact on how inventory levels are managed, as well as how products will be procured from suppliers and when those products will be shipped to customers. This direct impact on these activities is felt predominantly in the industrial sector in India. The price increase of copper is attributable to an increasing number of constraints on copper supplies globally, including supply chain disruptions, tight supply, and changes in international trade. As the landed cost of copper increases and price fluctuations continue, copper importers are facing more pressure on their profit margins and their working capital. This blog examines how copper importers are re-evaluating their cash-flow requirements and supply chain strategies in light of these market conditions and the extreme price levels that copper is currently trading at.

Why Copper Prices Have Breached $13,000

Due to multiple factors including global trade imbalances and supply interruptions, the price of copper on the London Metal Exchange recently crossed the mark of $13,000 per metric ton. One of the largest contributing factors to this rise was the influx of copper shipments into the USA, thereby concentrating the inventories into one centralised market – the USA.

As such, copper was being shipped to the USA in larger amounts, and as a result, the available inventories within other regions of the world had dropped. The reductions of supply in other regions of the world, as a result of the concentration of copper shipments to the USA, has created a more limited buffer for absorbing market disruptions, resulting in an increase in the overall price of copper on the LME and other international markets. Additionally, there have been disruptions to production and logistics within key regions that produce copper, which have further restricted supply.

The fact that inventories are being tightened has led to an increase in speculative positioning in copper. As such, since copper is an essential input to power production, electronics and electrical vehicles, the limited amount of mixed-quality refined copper available in the near future on international markets has added to additional upward pressure on prices in commonly importing economies.

As a result of all of these conditions, the higher landed cost of copper and the increased value of inventories will make it more difficult for copper importers to manage cash flow in the midst of fluctuating market prices, and will increase their levels of price risk.  To meet this challenge, optimisation of cash flow will become a key focus for copper importers in 2023.

 

What This Means for Indian Copper Importers

India depends heavily on imported refined copper and copper concentrates to support sectors such as power transmission, electronics, automotive manufacturing, renewable energy, and infrastructure. As global copper prices rise, the import value per shipment increases, even when import volumes remain unchanged. For copper importers, this results in three immediate impacts:

• Higher duty and tax outflows: Customs duty and IGST are calculated on assessable value, leading to increased upfront payments at the time of clearance and higher working capital blockage.
• Extended inventory holding periods: Price volatility often slows downstream offtake, increasing storage durations and tying up capital in inventory.
• Pressure on margins and cash flow: Rising input costs and slower cash conversion cycles place additional stress on liquidity, particularly for importers serving price-sensitive industrial segments.

Under these conditions, cash flow optimization becomes a supply chain consideration rather than a purely financial one.

Cash Flow Optimization: A Supply Chain Imperative

Historically, traditional methods of managing volatility in copper commodities markets such as decreasing imports or reducing stock levels created additional operational risk. As a result, Copper Importer Operators have shifted their focus toward leveraging supply chain structural levers to maintain liquidity while not impeding access to products.

Cash flow optimization includes:

• Deferred payment of taxes and duties while still within compliance.
• Enhanced inventory flexibility.
• Decreased expense associated with the cost of holding costly inventory (for example, Copper).
• timing of customs clearances to align with current market needs.

Free Trade Warehousing Zones (FTWZ) provide essential support in these areas.

How FTWZs Support Cash Flow Optimization for Copper Importers

A Free Trade Warehouse Zone (FTWZ) is a specialized economic zone created to facilitate trading through warehousing and logistics by allowing for temporary storage of imported goods without having to pay duties or IGST until they are sold/used within India. This system when combined with high copper prices, provides substantial financial advantages to Copper Importers.

1. Duty and Tax Deferment at Record Prices- Copper Importers that import Copper into a domestic tariff area are required to pay customs duties and taxes at the time of import based on the price at which Copper has been purchased. In an FTWZ area, copper can be stored on bond with payment of customs duties deferred until the copper is sold/used in the domestic market. When the price of copper exceeds $13,000 tonne the savings from the deferment of customs duties can work to the advantage of copper importers in the following ways:

• • Minimizing capital outlay at the time of importing copper
  • Allowing copper importers to only pay customs duties when the copper is sold/use.
  • Minimizing copper importers’ blocked working capital

If a copper importer imports an extremely high volume of copper into an FTWZ, the deferment of customs duties will create a significant amount of liquidity.

2. Flexible, Phased Clearance Aligned to Demand– The FTWZs allow you to clear your Copper stock in multiple imports or in stages rather than as one large import at once. When Market prices are highly volatile, and there is not secure downstream Demand, this helps businesses maximize the overall value of their Copper imports. 

By utilizing FTWZ, copper importers can:

• • Pay None or Little Duty on the Whole shipment initially. 
  • Keep track of currency value movements in the market and be able to adjust quickly to changes.
  • Clear only those products necessary for immediate sale or production.

This phased import structure increases cash flow optimization due to the decrease in the cash conversion cycle.

3. Mitigating Market Timing Risks– With a speculative commodity market that is frequently affected by shifts in inventory or by tariff-exemptions, timing is important. FTWZs (Free Trade Warehouse Zones) allow copper importers to differentiate between when an item arrives physically and when the customs clearance obligation is processed so that copper importers can better control when their financial obligations are incurred. Flexibility is essential when market prices are higher than normal as a result of short-term distortions in global supply and demand due to temporary disruption rather than from increases in fundamental demand.
4. Consolidation, Quality Control, and Repacking–FTWZs will allow copper importers to offer their customers additional services that add value, such as separating, repackaging, labeling, and quality inspection under customs supervision. This allows copper importers to:

• • Better differentiate and customize their inventories for multiple customers and industries.
  • Reduce waste
  • Improve fulfillment time.

The efficiency with which an order is fulfilled, in turn, provides cash flow opportunities by decreasing indirect delivery costs.

 

FTWZs vs Traditional Bonded Warehouses in a High-Price Cycle

Bonded warehouses provide duty deferment but FTWZ will offer a greater scale and clearer regulatory and operational environment compared with bonded warehouses. This is especially true for larger bulk commodities such as copper. FTWZ are designed for international trade and have:

• Integrated customs infrastructure
• Large format storage for metal products
• A simpler process for handling large numbers of SKUs and customers
• Streamlined compliance with SEZ laws

FTWZ are a better long-term solution for copper importers dealing with record-high prices and limited availability of product than are bonded warehouses.

OSV FTWZ Helped Smart Copper Importing

The OSV FTWZ offerings provide clients engaged in importing copper or high-value commodities with compliant, fully scalable and strategically positioned FTWZ infrastructure to support their copper importation needs. Using our extensive experience and knowledge of industrial metals and how to import regulated commodities, OSV FTWZ provides:

• Secure, bonded storage of copper through duty/tax deferments
• Phasing the domestic customs clearance process with demand
• Complete customs support including documentation
• Adding value to customer’s business by providing additional services such as segregating and managing inventory
• Close proximity of major ports, industrial corridors, and areas where copper is consumed.

At a time when copper prices have reached record highs, and demand for financing by using working capital to purchase copper is stronger than ever, OSV FTWZ offerings convert a client’s warehouse from a cost centre to a tool for optimising cash flow.

Conclusion

By surmounting the $13,000-per-ton threshold of copper pricing, an intermediate metal has indeed tested the limits of global supply chains. For copper importers in India, securing the copper supply is now just one element of managing liquidity in the face of increasing costs and greater price fluctuations. Copper importers can optimise their cash flow significantly by leveraging Free Trade Warehousing Zones (FTWZ) and changing the way copper is imported by deliberately making changes to the timing of duty payments. In an unpredictable marketplace, flexibility is now the most valued asset and FTWZs represents this type of asset.