copper price

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The Copper Monthly Metals Index (MMI) rebounded to 74 following last month’s fairly sizable drop from 78 to 73 (hitting a 2019 index  low).

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LME copper prices dropped by nearly $100/mt around the first of July after gaining strength in June, then traded sideways during the first week of the month.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Meanwhile, LME warehouse stocks increased.

Source: MetalMiner analysis of FastMarkets

However, copper mining disruptions continue to impact mine output. According to Reuters, Chile’s exports of copper declined by 14% in June compared with June of 2018, coming on the heels of extremely rainy weather early in 2019. Additionally, falling ore grades continue to hurt Chilean mining production.

The Congo army recently evicted illegal miners working at Kamoto Copper Company (KCC), a Glencore subsidiary in the Kolwezi area. According to the company, around 2,000 illegal, small-scale miners intruded illegally daily, on average. The move followed a landslide that killed 43 people at the KCC concession.

Zambia announced plans for a law that will compel miners to procure locally, according to the country’s mine minister, as reported by Reuters. Zambia continues to take a greater role in the mining sector. Zambia ranks second in Africa in copper export volume, with the metal dominating the country’s exports.

Chinese Copper Scrap vs. LME Copper

The price gap between Chinese copper scrap and LME copper narrowed last month considerably due to the steep LME price drop. This month, however, the slight LME price increase exceeded the slight increase in Chinese copper scrap prices.

Notably, China’s refined copper output in May dropped by 5.2% compared with May 2018. Output totaled 711,000 tons, marking a 3.9% decrease compared with the previous month.

The recent crackdown on scrap imports has likely caused the production decline. Further restrictions impacting high-grade copper scrap came down in early July as the Chinese government continues to ramp up its crackdown on scrap.

Given that scrap imports fueled about 10% of production last year, producers need to find alternative sources of raw material. According to China Minmetals Corporation in press reports, copper imports made by the company from a preferred Chilean trading partner look set to increase this year to a value of $900 million.

What This Means for Industrial Buyers

With copper prices showing some strength in June, industrial buying organizations will need to pay careful attention to macroeconomic growth, which could continue to support prices.

It’s important for buying organizations to understand how to react to copper price movements. The MetalMiner Monthly Metal Buying Outlook helps buyers understand the copper marketplace.

Actual Copper Prices and Trends

Copper prices strengthened this month across the index with the exception of Korean copper strip, which dropped 0.4% to $8.29 per kilogram.

The Indian copper cash price increased by 10.9%, the largest increase in the index this month, to $6.53 per kilogram.

Chinese prices turned around this month, as all of the Chinese prices in the index increased. China’s primary cash price and copper wire price increased by 2.7% to $6,898/mt and $6,892/mt, respectively. Copper bar increased 2.8% to $6,885/mt.

Chinese scrap copper #2 increased by 0.6% to $5,592/mt.

U.S. prices in the index all increased by 1.7%. U.S. copper producer copper grade 110 increased to $3.49 per pound, grade 102 priced at $3.68 per pound and grade 122 at $3.49 per pound.

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The Japanese primary cash price increased by 2.1% to $6,163/mt. The LME primary 3-month increased by 2.8%, up to $5,982/mt.

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This morning in metals news, the copper price didn’t budge Thursday ahead of a key meeting between U.S. President Donald Trump and Chinese President Xi Jinping, Nucor announced a price hike for flat-rolled steel products, and automaker Tesla won a tariff exemption on aluminum imported from Japan.

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Copper Price Holds Flat

Markets are anxiously awaiting the results of a key meeting between U.S. President Donald Trump and Chinese President Xi Jinping during the G20 Summit in Japan this weekend.

On Thursday, however, the copper price held flat.

The LME three-month copper price ticked up 0.1% Thursday after soaring to a five-week high during the previous session, Reuters reported.

Nucor Raises Flat-Rolled Steel Prices

Steelmaker Nucor announced its first price hike on flat-rolled steel since February, according to Yahoo! Finance.

The price hikes apply to HRC, CRC and HDG, according to the report.

Tesla Wins Aluminum Tariff Exemption

Electric car maker Tesla secured a tariff exemption for aluminum it imports from Japan, Reuters reported.

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The automaker sought the exemption for the aluminum — which it uses for the production of battery cells at its Nevada Gigafactory — at an annual rate of 10,000 tons, according to the report.

Copper appears to be caught in the crosswinds.

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After months of steady declines from a peak of U.S. $6,600 per ton in April, the copper price had drifted down to well below $6,000 per ton on fears of what impact the ongoing trade war between the U.S. and China would have on top consumer China.

But while trade war tensions continue to provide significant headwinds, an extending strike at Codelco’s Chuquicamata copper mine is raising concerns about supply.

The copper market is considered to be in deficit, according to Reuters, saying the global refined copper market showed a deficit of 51,000 metric tons in March, compared with a 72,000-ton surplus in February. Bloomberg cited the International Copper Study Group, which forecast a deficit of 189,000 tons by the end of this year.

Codelco’s strike has been rumbling on for 12 days now. Chuquicamata is the company’s third-largest mine, producing 321,000 metric tons last year (so over 10,000 tons have been lost so far).

Some 3,200 workers at the mine are represented by three unions. Their grievance is focused on comparable terms of employment between retiring older workers and incoming new workers. The company is holding back on the more generous terms older workers enjoy as they negotiate the severance of some 1,700 workers due to the transition from open pit to underground mine in the next 12 months.

So far, Codelco says it has made the best offer it can.

Workers, however, are not satisfied.

Negotiations are at an impasse. The union is going back to the workers later this week for an extension to the strike. In and of itself, the loss of Chuquicamata’s production is not critical for the copper market, but it heightens concerns about where supply is going to come from, as investment in new mines has been depressed for some years by excess supply and low prices.

Perversely, though, inventory has been rising.

Both the LME and SHFE have seen increases in stocks this year, although they have fallen somewhat in the last month or so. Generally, inventory levels do not suggest a market in crisis.

So, what can we make of the recent price rises: are they purely a reaction to the Chuquicamata strike and a weaker dollar boost to commodity prices, or the buildup for a move higher?

Demand, while less robust than previous years, remains fairly solid. Much of the negativity is down to fears over the trade conflict between the U.S. and China, as is the case with much of the commodity and equity markets; a resolution to that squabble would see a return of optimism and higher prices.

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Without it, though, it is hard to see significant upside to copper this year — the fundamentals are not supporting that yet. In the meantime, sentiment is king.

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This morning in metals news, Rio Tinto downgraded its 2019 iron ore guidance, India is looking to combat Chinese steel imports with higher duties, and the copper price lost some gains late this week on the back of U.S.-Iran tensions and ahead of the G20 Summit in Japan.

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Rio Tinto Downgrades Iron Ore Guidance

Due to operational challenges, Rio Tinto this week announced it has downgraded its 2019 iron ore guidance down to between 320 million and 330 million tons (from between 333 million and 343 million tons).

“Rio Tinto Iron Ore is currently experiencing mine operational challenges, particularly in the Greater Brockman hub in the Pilbara,” the firm said. “This is resulting in a higher proportion of certain lower grade products, partly to protect the quality of our flagship Pilbara Blend.

“Around 1.5 million tonnes of these products were sold in the first quarter, as noted in the 2019 Quarterly Operations Review, 16 April 2019. Additional sales of these products will be made during 2019.”

Indian Steel Ministry Eyes Higher Steel Duties

The Indian steel ministry is targeting a duty increase on imports of finished steel products, Reuters reported, up to 15% from a range of between 7.5% to 12.5%.

According to the report, the Indian steel ministry cited concerns related to the U.S.-China trade war and resulting diverted supplies of steel away from the U.S. market.

Copper Price Falls

After making gains earlier in the week, the copper price slipped on account of tensions between the U.S. and Iran, Reuters reported.

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Three-month LME copper fell 0.4% to $5,592 on Friday after hitting its highest level since May 21 on Thursday, according to the report.

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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.

Source: MetalMiner analysis of FastMarkets

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.

Source: MetalMiner analysis of FastMarkets

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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This morning in metals news, the LME copper price continued its tumble this week, U.S. imports from countries like Vietnam have increased and the June 10 Mexico tariff deadline draws near.

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Copper Down for Eighth Straight Week

The copper price is set to fall for the eighth consecutive week this week, Reuters reported.

LME copper fell 1% Friday and was down 1.4% for the week, according to Reuters.

Rising Imports

Amid ongoing trade tensions with China, the U.S. has seen import levels from other countries rise.

Citing Census Bureau data, CNN reported the U.S.’s imports from Vietnam increased 38% over the first four months of this year. Imports during that period from Taiwan (22%), South Korea (17%) and Bangladesh (13%) were also up.

Tariffs on the Horizon

Vice President Mike Pence said the U.S. is still planning to slap tariffs on imports from Mexico next week, Bloomberg reported.

President Donald Trump has threatened to impose an escalating tariff, beginning at 5%, on all imports from Mexico if the two countries can’t reach a deal to stem the flow of migrants into the U.S.

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According to Mexican Foreign Minister Marcelo Ebrard, talks to reach a deal and avoid tariffs continued Friday.

While industrial metals started 2019 in an upward trend, the complex showed weakness as 2019 progressed.

In fact, all of the industrial metals hit down around current support levels — and lower at times — during the past few weeks.

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With industrial metals down across the board, are we moving into bear market territory? Or have we witnessed a temporary blip resulting from less certain macroeconomic conditions?

To examine the situation in more detail, let’s have a look at some of the key industrial metals and recent prices.

The DBB Trended Back Down to Mid-January 2019 Values

After a bullish start to the year, the DBB peaked on a short-term basis in early April, then trended back down once more.

Compared with July 2018’s larger drop, this one appears milder, but the short-term downward trend remains.

Source: MetalMiner analysis of NASDAQ.com data

The DBB tracks three key industrial metals: aluminum, copper and zinc. Let’s take a look at each metal to assess price performance using the LME 3-month futures price.

LME Aluminum

Looking at weekly trading volume, it looks like the downtrend in price is played out (based on recent positive trading volume). Also, both positive and negative weekly volumes looked weak recently, with a lack of momentum in prices.

Source: MetalMiner analysis of Fastmarkets.com

This indicates continued sideways movement on the LME aluminum price.

Given that the aluminum market moved largely sideways during the course of 2019, the Moving Average Convergence/Divergence (MACD) can also indicate where the market is at this time.

The MACD tracks the difference between two exponential smoothed moving averages (using the 12- and 26-day averages); it’s the black line in the graph below, which sits along the bottom edge below the price line. The red line, or signal line, uses the nine-day exponentially smoothed average of the MACD.

Source: MetalMiner analysis of Fastmarkets.com

When the values hold above zero, this indicates the market is overbought. When they are below zero, this indicates the market is oversold. If the lines continue to trend downward, then the downtrend is still in process.

By this indicator, the aluminum market looks oversold and a buy signal emerged recently when the longer-term line turned up after a couple of days of upward market momentum and edged past the signal line. The signal line followed a day later, indicating the downtrend lost steam.

Based on this analysis, aluminum prices may have already hit bottom and turned around; therefore, the aluminum market itself does not look bearish at present.

LME Copper

LME copper prices lately have showed clear weakness. However, they found support again recently in daily trading, stopping a further slide in price.

With negative trading volume still registering on a weekly basis, the price dynamic for copper still looks weak.

Source: MetalMiner analysis of Fastmarkets.com

Looking at volume on a weekly basis, we can see that it trended up again last week. Through the first few days of this week, volume registered as negative on the partial week’s data.

Copper prices still look weak.

LME Zinc

Like the other industrial metals, LME zinc prices trended downward in April.

Looking at weekly volumes for zinc, the price action looks mixed. (Note that the last bar shows only partial data for the week in progress.)

Source: MetalMiner analysis of Fastmarkets.com

Given the clearer trend when looking at LME zinc prices, we can use the 4-9-18 day moving average analysis to assess the state of the current downtrend. The result of the analysis shows the downtrend remains in process as the moving averages queue in the expected order, with the 18-day average on top (blue line), followed by the nine-day (purple line), then the four-day average (red line).

Source: MetalMiner analysis of Fastmarkets.com

Therefore, in the case of LME zinc (using this method) the downward trend continues. The red line, however, the shortest average and therefore most sensitive, has recently shown signs of turning back up.

Source: MetalMiner analysis of Fastmarkets.com

Looking at a MACD analysis, based on the 12-, 26-, and nine-day periods, the downtrend continues with the signal line in red sitting above the MACD line in black, while both continue in a downward trend below the zero point of the MACD indicator bar.

Readings below zero on the indicator show bullishness in the sense that prices may turn around. However, in this case the lines continue moving in a downward trend, so we may not have seen the bottom of zinc prices just yet.

What this Means for Industrial Buyers

During recent weeks, the main industrial metals tracked by MetalMiner showed weakness. Will this be temporary or are we looking at a more cyclical movement into bear market territory?

While aluminum prices look relatively stable, copper and zinc prices appear weaker, with no clear signal given that the downturn has passed.

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Therefore, while it’s too soon to call a bear market, it’s also too soon to say we’ve avoided one.

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The Copper Monthly Metal Index (MMI) came in again at 79. Nearly all of the prices in the copper basket fell this month, with price declines in the range of 0.3%–1.9%.

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LME copper prices moved sideways during the month and oscillated around $6,424/mt, struggling to hold on to the $6,500 level (despite hitting that price at multiple points throughout the month).

On the other hand, the price generally stayed above the longer-term resistance point of $6,380/mt. The price briefly dropped back later in the month before surging again, then sliding once again into early April.

Source: MetalMiner analysis of FastMarkets

LME copper prices trended upward rapidly at the start of 2019 on concerns over supply.

While the correlation between actual warehouse stocks and pricing generally falls outside of the factors driving actual LME copper prices, as pointed out in the most recent Monthly Metal Buying Outlook Report, recently traders traded on this information as warehouse stocks dwindled to historical lows.

Another key factor driving the perception of a potential shortage of the metal could be that supply and demand factors do not presently balance, with a multiyear production deficit of refined copper, as reported by the International Copper Study Group (ICSG).

What This Means for Industrial Buyers

While the bullish copper run ran out of steam by March when the price traded sideways, some of the increase in price from earlier in the year held, with prices now oscillating around a higher short-term level.

However, the market remains in a sideways trend.

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Actual Copper Prices and Trends

In March, most of the prices in the basket dropped, with the exception of Korean copper strip, which increased by 3.6%.

The Chinese prices in the basket showed the largest declines, albeit modest, in the range of 0.3%-1.9%.

Japanese primary cash and Indian copper cash prices declined as well, by 0.8% and 0.9%, respectively. U.S. prices for copper producer grades 110, 102 and 122 were down by 0.5%.

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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This morning in metals news, the copper price fell again, stocks picked up Thursday as U.S.-China trade talks continued and shares of Reliance Steel are up 31% this year.

Has Copper Hit a Wall?

The London copper price had been enjoying an upward trajectory from the start of the year through most of February, but that trend seems to have run out of steam.

LME copper price. Source: LME

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Since late February, the metal has been trading mostly sideways, but on Thursday’s session fell again on weak German manufacturing data, Reuters reported.

In addition, the situation at the Las Bambas copper mine in Peru escalated, as a judge ordered jail time for lawyers who represented indigenous villagers who blockaded the mine in protest, according to the Reuters report.

Stocks Up on U.S.-China Talks

The ongoing trade talks between the U.S. and China continued this week in Washington following last week’s sessions in Beijing; once again, markets are showing great sensitivity to any semblance of good (or bad) news out of the negotiations.

Stocks were mostly slightly up Thursday, MarketWatch reported.

Reliance Steel Shares on the Rise

Metals service center operator Reliance Steel has seen its shares surge 31% in the year to date, according to Zacks Equity Research.

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According to the Zacks analysis, the company has benefited from its focus on high-margin products, and has seen strong demand in the aerospace and automotive markets.

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This morning in metals news, U.S. Treasury Secretary Steven Mnuchin tweeted Friday that this week’s round of trade talks with China were “constructive,” LME copper is on its way for its first quarterly gain since the end of 2017 and China’s imports of copper are forecast to dip this year.

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U.S.-China Talks Continue

Markets reacted positively late this week on optimism from the latest round of U.S.-China trade talks, this time held in Beijing over Thursday and Friday.

U.S. Treasury Secretary Steven Mnuchin tweeted that the talks were constructive.

As Mnuchin noted, trade talks are scheduled to continue next week in Washington, D.C.

Copper Makes Gains

According to Reuters, LME copper is set to notch its first quarterly gain since the end of 2017.

Copper stockpiles in LME-registered warehouses are moving toward 11-year lows, according to the report.

China Copper Imports

Speaking of copper, China is expected to import far less of the metal in 2019, according to a Reuters report citing research house Antaike.

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According to the report, China’s copper imports are forecast to fall 14.7% on account of increased domestic production.