The Copper MMI inched two points higher in July, driven by the recovery of the LME Copper 3-month price, which has been bounced off its previous lows and has increased by 4.98%. The copper MMI is back to April’s levels.
Analysis of supply and demand might suggest quite a bullish outlook for copper. Supply and demand has indeed driven copper prices in June.
During this past month, strikes have eased and production ramped up again. Even the strike at Freeport mine in Indonesia, the world’s second-largest copper mine, is set to continue and production will likely remain the same.
On July 4, mining company Antofagasta announced it, too, might face a strike. This strike could impact two copper mines: Zaldivar and Centinela. The decision will be made at the end of this week. Chilean mining company Antofagasta Minerals is one of the largest global copper producers, with a combined annual production at both mines of 160,000 tons.
The International Copper Study Group (ICSG) has announced a possible supply deficit for this year. This is based on June’s released data on copper world mine production, which is estimated to have decreased by 3.5%, and world refined production, which is estimated to remain unchanged.
However, LME copper prices have started July with a five consecutive days of drops. Although June suggested a slight uptrend for copper, MetalMiner does not believe the uptrend is sustainable, as I reported in last Monday’s copper article.
The LME copper price has not been able to break its psychological ceiling of $6,0000/metric ton. Moreover, recent weakness at the beginning of July, combined with poor trading volumes, suggests further weakness. Unless trading volumes shift, they are not supportive of copper prices.
The U.S. dollar and Chinese PMI indicators have historically shown correlation with copper prices. Even the U.S. dollar has shown a little uptrend during June, but its downtrend may continue, which would negatively impact copper prices. The short uptrend that has boosted copper prices during May and June has been caused by supply concerns.
The Chinese Manufacturing PMI rose unexpectedly to 50.4 in June. But this small increase may just be a blip. Current sentiment suggests Chinese demand may once again fall, as authorities are still working to curb financial risks.
In addition, the construction sector has fallen during the first quarter of 2017 by 83% (measured by value).
What This Means for Industrial Buyers
Though it’s tempting to assume that the two-point increase and the supply-and-demand narrative suggests a bullish outlook, we would like to see a stronger uptrend and increasing trading volumes to support a more bullish narrative.
Actual Copper Prices and Trends
LME copper rose this month, contrary to its previous slight downtrend. Copper’s closing price in June was $5,920/metric ton (a 5% leap). The price was at its highest since March 1, when it stood at $5,939.50 per metric ton. Since that March reading, the copper price ticked downward in each successive month: $5,880 (April), $5,713 (May) and $5,639 (June).
Indian copper prices rose by 4.6% to $5.95 per kilogram.
Chinese primary copper increased by 4.5%, up to $6,950.98/mt, the highest closest price since the $7,029.59/mt price as of March 1.
Prices of U.S. copper producer grade 110 and 122 increased 3.3%, reaching $3.44 per pound. The price of U.S. copper producer grade 102 increased 3.1%, going up to $3.63 per pound.