The Copper Monthly Metals Index (MMI) decreased by 7.3% for this month’s reading, as copper prices declined.
The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.
Since the beginning of the year, there have been concerns over copper production levels and stock availability.
LME on-warrant tonnages were at the 100,000/mt level, averaging 84,654 metric tons between January and June. However, throughout June, stock tonnage nearly doubled. Stock tonnage started the month at 97,975 tons and closed at 198,275 tons.
This could be a signal that speculative demand has adjusted. This is particularly true after China attempted to remove excessive speculation by issuing stern warnings to the domestic market, along with the recent release of state stock.
China’s efforts had a strong effect on the copper market. The country represents approximately 50% of global copper consumption.
Minutes from the Federal Reserve’s June 15-16 meeting were released July 7. While it has no timeline, the Fed reaffirmed that it expects to scale back asset purchases sooner than anticipated. This would lead to the reversal of quantitative easing policies. Furthermore, it would lead to increases in interest rates and a stronger dollar.
As MetalMiner reported last month, an inflated (i.e., weaker) US dollar tends to increase demand for copper as it increases accessibility for holders of other currencies. Consequently, a stronger dollar could depress copper demand.
However, other factors may influence copper prices. Those include release of metal stock in China and Beijing’s policies aimed at promoting the development of infrastructure and new energies.
China starts state reserves sale
China sold its first round of state reserves July 5. Instead of taking two days to sell the metal, the auction only lasted one day.
In the case of copper, the bidding started at 8:00 a.m. Beijing time and concluded 75 minutes later. A total of 146 metric tons were sold, according to China Minmetals Corp.
Reuters reported that a local buyer speculated that the sale price was around “CNY 67,700/mt ($10,474/mt), a 1.6% discount to the price of SHFE copper for delivery in August.”
Following the first auction, the National Food and Strategic Reserves Administration of China confirmed that 100,000 metric tons of metal were sold and that it would continue to release state reserves.
Actual metals prices and trends
The LME three-month copper price decreased by 7.5% month over month to $9,406 per metric ton as of July 1.
Chinese copper scrap dropped by 7.5% to $9,307 per metric ton. Similarly, Chinese primary cash copper decreased by 8.3% to $10,642 per metric ton.
U.S. copper producer grades 110 and 122 dropped 7.1% to $5.12 per pound. Producer grade 102 decreased by 6.8% to $5.34 per pound.
Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.