Copper MMI: Global Supply Deficit Outweighed by Macroeconomic Uncertainty
This month’s Copper Monthly Metals Index (MMI) reading for copper dropped to 73 from last month’s reading of 78, the new low for the year.
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LME copper prices continued to trend downward, but technically still remain in a long-term bull market.
In the shorter term, daily chart prices recently came close to dropping back to start-of-the-year lows.
On the other hand, the longer-term outlook indicates hints at some upward momentum still, given that pricing bottoms have continued to move progressively higher since 2016.
In the second part of 2018, price momentum shifted downward, but support levels held at higher levels than during the 2017 period when copper prices traded around $5,600/mt. Prices remain at a critical point.
Chinese Copper Scrap vs. LME Copper
The price gap between Chinese copper scrap and LME copper narrowed recently due to the steeper LME price drop.
According to press reports, copper smelter treatment charges dropped to a 6 1/2-year low in China. China continues to add capacity, with projected growth of 1 million tons expected for 2019. The increase in supply suppresses treatment charges (TCs) for copper.
Global Copper Supply Deficit Forecast for 2019
The International Copper Study Group (ICSG) recently forecast a copper metal deficit of 190,000/mt in 2019. However, according to a recent Reuters report, the projected forecast refined metal deficit totals 270,000 mt due to ongoing supply issues in Peru and Zambia, with concentrates looking tight. Supply disruptions could total around 1,200,000 mt, or around 5% of typical supply levels.
Industrial metals respond to global economic conditions, given that players tend to be large international entities that trade extensively cross-border.
Therefore, we can generally expect copper prices to respond to macroeconomic factors like the dollar and global GDP growth rates; even a small percentage change in global growth rates can impact the price of copper.
According to a recent presentation by global miner Rio Tinto, macro headwinds have impacted demand this year.
For the longer term, expectations remain positive, with the company projecting global annual growth to average 3.5% over the next 10 years. Ninety percent of Rio Tinto’s total mining output across metals moves cross-border.
What This Means for Industrial Buyers
With macroeconomic uncertainty at hand, industrial buying organizations should watch the copper market carefully for shifting momentum.
It’s important for buying organizations to understand how to react to copper price movements. The MetalMiner Monthly Outlook report helps buyers understand the copper marketplace.
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Actual Copper Prices and Trends
Copper prices showed weakness globally this month.
The Japanese primary cash price dropped by 10% to $6,035/mt. The LME primary 3-month dropped by 9.6%, with the price falling to $5,820/mt. India’s copper cash price dropped 8.3% to $5.89/kilogram.
Chinese prices also dropped steeply, with all the Chinese prices in the index down by 7.6%. China’s primary cash price dropped to $6,717/mt.
Chinese scrap copper #2 decreased by 2.4% to $5,560/mt. Korean copper strip declined by 0.4% to $8.32/kilogram.
U.S. prices dropped in the 6-7% range. U.S. copper grade 110 dropped to $3.43/pound, down from $3.87/pound last month, marking the third straight month of price declines.
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