Copper at ₹1,450 a kg: Coimbatore's MSMEs squeezed as prices jump 75% in a year

Copper prices in Coimbatore, home to one of India's largest clusters of micro, small and medium enterprises (MSMEs), have risen by nearly 75% over the past year, eroding the margins of units that make automobile components, electric vehicle parts, pumps, renewable energy equipment and electronic goods.

One kilogram of copper now costs about ₹1,450, against ₹800–₹900 a year ago. Prices had touched ₹1,500 a kg earlier this year before easing slightly in recent weeks.

Copper is central to these industries because of its high electrical conductivity, and it is used in wiring, motors, transformers and electronic components. For firms in Coimbatore, which supply components to larger manufacturers, the metal is a significant part of production costs.

India imports almost all of its copper requirement. As the United States and China are the largest consumers of copper globally, domestic prices move closely with international markets. Industry sources said the use of recycled copper has been rising in recent months as buyers look for cheaper alternatives.

V. Rangaswamy, president of the Coimbatore District Small Industries Association, said units would have absorbed a price increase of less than 10%. With a rise of more than 60%, however, MSMEs have been able to pass on only 10%–15% of the higher copper cost to their customers. Prices of steel and zinc have also gone up.

“MSMEs fix their prices once a year or once in two years. Hence, they are unable to pass on the hike fully to the customers. Further, it is not just the price of copper. The cost of all petroleum-based products has also gone up. These have eroded the competitiveness of the MSMEs,” he said.

He added that schemes such as raw material banks do not help in such situations because copper is a precious metal and cannot be stored in bulk. “Copper is like gold now. Even if a small quantity is lost, the MSMEs will stand to lose,” he said.

Jayakumar Ramadas of Mahendra Pumps said the use of copper-coated wires is becoming common in many pumpset manufacturing units. “We tell our customers whether the wires used are copper or copper coated, and have priced the pumps accordingly,” he said. Technology, he added, would gradually evolve around the use of copper-coated products for industrial use.

The pressure is not limited to a single product line. Because many MSMEs in the cluster work on annual or multi-year contracts with fixed prices, a sharp and sustained increase in input costs cannot be passed on quickly. That squeeze on margins affects their ability to invest in capacity, upgrade equipment or bid competitively for new orders.

Industry representatives say that unless copper prices moderate or contracts allow for more frequent price revisions, the pressure on the cluster's competitiveness is likely to continue. For now, units are managing through a mix of partial price revisions, substitution where technically feasible, and tighter control over material use.