copper price

Copper prices rebounded sharply after declines in early May. While prices continue to find a bottom on a macro scale, they remain sideways in the short term. As a result, copper has been unable to establish a clear direction, either bullish or bearish.

The Copper Monthly Metals Index (MMI) fell by 2.89% month over month.

Copper prices fall 4.3% ahead of 0.75% rate hike issued by Fed

The anticipated 0.75% interest rate hike came to fruition on Wednesday. The hike marks the largest since 1994 as the Fed attempts to restrain rising, persistent inflation that hit 8.6% in May. Prior to the latest CPI data, markets expected another half-percentage-point hike followed from previous Fed meetings. In its June 15 press release, the Fed also indicated that it anticipates “ongoing increases in the target range will be appropriate.”

Ahead of its formal announcement, markets expectedly began to price in the Fed’s latest move. Copper prices saw an overall 4.3% sell-off during the week prior. Despite this, copper prices began to form a bottom on short timeframes following the press release. Nonetheless, prices sit substantially beneath their early March peak. The larger trend appears decidedly bearish. 

Ignore the noise. Spot the trend. Related article: The Art of Timing Your Metal Buy 

Indecision, division await vote on Chile’s new constitution

Chile awaits the completion of a new constitution. The constitutional assembly already voted to reject plans to nationalize key parts of its mining sector. However, if adopted, the new constitution will veer the country sharply left as it expands social rights and environmental protections. This will also create a National Health Service, include reparations related to historically Indigenous land and eliminate the Senate from the bicameral congress to create a Chamber of Regions instead.  

Copper

Adobe Stock, 2022

Revisions began on May 14 with the final draft slated for completion on July 4.  The document then enters a referendum. Chilean voters can either approve or reject the new constitution on Sep. 4 as decided by a simple majority.

While the path toward a new constitution began with 80% of the vote in the 2020 plebiscite, approval of the document remains far from certain.  According to a poll by the Center for Public Studies (CEP), respondents that would approve, reject or remain undecided stood at 25%, 27% and 37%, respectively. The remaining 11% either declined to answer or did not know. No clear path exists should voters reject the constitution come September. The poll also indicated should such a scenario play out, 42% of respondents favored a new draft, 31% favored a revision and 15% wanted the current constitution to remain unchanged. Polling reported by the Guardian, however, suggests support for such reform could wane. According to that data, 46% of respondents indicated intent to reject the latest draft while 38% approved.

All copper buying organizations need to closely follow these developments as Chile accounts for over 33% of global copper supply.

The  MetalMiner weekly newsletter covers copper developments.

Impact on copper

While the present draft managed to circumvent radical plans related to copper mining, the sector would see an impact should citizens approve the new constitution. Of note, article 25 requires miners to designate “resources to repair damage” to the environment from the negative effects of mining. The constitution will also include a ban on mining in glaciers and areas essential to protect Chile’s water system. 

According to an interview with Antofagasta CEO Iván Arriagada, most of the company’s current concerns relate to uncertainty of if a shift will occur come September. Depending on the final terms, adoption of the constitution could likely impact long-term investments for the company. Concern over the restriction of private water rights within the new constitution, however, remains largely overstated. The mining industry largely veered toward the use of seawater to operate facilities and will continue to move in that direction. 

The mining sector accounts for roughly 11% of Chile’s GDP. According to Chile’s Centre for Copper and Mining Studies (Cesco), a lack of exploitation of mineral resources would threaten Chile’s overall wealth by 20-25%. Although many of the social reforms remain popular among citizens, threats to mining investment could weigh down the initial widespread calls for reform. Should Chilean citizens approve the new constitution, limits to and additional price pressures on the mining industry would inevitably filter down to global copper prices.

Learn when to buy copper based on the trend, with the MetalMiner Insights platform. Request a demo.

Actual metals prices and trends

  • The LME three-month copper price fell by 3.18% month-over-month to $9,510 per metric ton as of June 1.
  • Chinese copper bar declined by 4.18% to $10,679 per metric ton. Chinese copper scrap fell by 6.69% to $9,323 per metric ton. 
  • US copper producer grades 110 and 122 decreased by 1.85% to $5.29 per pound. Producer grade 102 fell by 1.78% to $5.51 per pound.

 

Starting in late April, copper prices began to take out prior lows. It seemed like an attempt to find a bottom and reestablish a potential bullish reversal in the short term.

The Copper Monthly Metals Index (MMI) fell by 3.04% month over month.

Know what to do when the trend shifts. Related article: The Art of Timing Your Metal Buy 

Shanghai Remains Under Lockdown, Beijing on the Brink

Despite declining case counts, Shanghai remains under a lockdown that has continued for more than a month. Since April 22, cases within the city have remained within a “continuous downward trend,” according to the city’s vice major Wu Qing. The optimistic data could indicate that the lifting of restrictions may be around the corner.

However, Qing also cautioned that while “the epidemic has come under effective control,” the city will continue to chase China’s ongoing zero-COVID strategy. Undeterred by the larger economic impacts, Qing stated at a separate meeting, “we cannot relax, we cannot slack off: persistence is victory.”

On the other hand, Beijing’s COVID case counts continue to rise. Thus far, the capital city has managed to circumvent sweeping lockdowns like those seen in Shanghai. This is likely due to strict mitigation efforts involving closing subways, public venues, and some residential buildings

The lastest reports indicate that the current outbreak’s spread through Beijing remains slower than what was seen during the same period in Shanghai. However, rising case counts nonetheless veer ever further from China’s broad zero-COVID standard. As the virus spreads, the possibility of more extensive restrictions (and of continued economic ramifications) increases.

Caixin Manufacturing PMI Hits 2-Year Low

Copper vs Caixin

The impacts of China’s zero-COVID approach saw the Caixin Manufacturing PMI plummet to a 2-year low in April. In fact, it fell at the steepest rate since the initial onset of the pandemic in 2020. All in all, the index contracted to 46 from 48.1 in March.

As factory activity contracted, so too did China’s demand for metals. According to data released in April by the General Administration of Customs, copper imports dropped 8.8% from February to March. This trend is expected to continue through May, with little changing thus far in the way of lockdowns.

The Caixin Manufacturing PMI stands as a leading indicator of Chinese economic strength. Historically, copper prices have loosely mirrored its larger trends. The most recent decline in LME copper prices appears, at least to some extent, reflective of the most recent contraction.

Identify the best times to purchase copper buy copper with the MetalMiner Insights platform. Request a free demo here

Could Copper Prices Fall Further?

China is the largest producer and importer of copper in the world. As such, the state of its economic activity has larger implications for the world’s metal markets. The recent market softness created by muted Chinese demand will likely persist until their economy emerges from lockdowns, which has yet to happen. Should the Caixin Manufacturing PMI hold as a leading indicator, copper prices will likely continue to mirror China’s manufacturing activity.

In the short term, as has happened with each wave and variant of COVID, China’s cities will eventually recover from the current outbreaks. There will, of course, likely be more. It remains to be seen what will shake China’s resolve about its current COVID mitigation strategy and when this might happen. Around the world, China remains the last major holdout in an economically restrictive approach to the virus.

In the medium term, the 20th National Congress of the CCP will occur in the fall, most likely November. As the congress is filled with Xi proteges, President Xi’s reelection appears, at this point, to be the most foreseeable outcome. However, Xi would not be the first politician to shift his policies once he secures an additional term. That being said, there is no indication that Xi will adopt a new approach to the virus at any point.

The  MetalMiner weekly newsletter covers copper developments.

Actual Metals Prices and Trends

  • The LME three-month copper price fell by 5.49% month-over-month to $9,822 per metric ton as of May 1.
  • Chinese copper bar declined by 3.65% to $11,153 per metric ton. Chinese copper scrap fell by 3.49% to $10,150 per metric ton. 
  • US copper producer grades 110 and 122 decreased by 5.6% to $5.39 per pound. Producer grade 102 fell by 5.4% to $5.93 per pound.

Following a strongly inflationary metal environment in Q1, Q2 2022 is looking like a whole different ballgame. Indeed, it’s no secret that the global economy is currently facing a number of major challenges. Alone, none of these would be enough to derail us from last year’s strong rebound. When added together, however, they’re helping to shape a far-from-rosy outlook for the 2022 metals forecast.

The “Winds” of Change?

A recent Capital Economics note to clients phrases it particularly well, stating that “all three of the world’s major economic blocs are now facing significant headwinds.” In the US, the storm stems from an increasingly-hawkish Federal Reserve. Meanwhile, the euro-zone faces mounting pressure from the recent massive squeeze in real incomes which threatens to push the region into recession.

In China, the government’s immediate challenge has been quashing the continuing Omicron outbreak. Unfortunately, the country’s zero-COVID initiative has so far done little to affect the spread of the virus. What it has done is tightened restrictions across some of the country’s biggest and most economically-important cities.

The Omicron variant is by far the biggest wave of infections to hit China, a country still woefully under-protected in terms of vaccines. According to CE, the areas impacted account for some 40% of China’s GDP and 80% of China’s exports.

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China Activity in Areas with Local Outbreaks (%)

A look at how the metals forecast might be impacted by China's COVID situation.

COVID is Just the Start of China’s Worries

Even without the lockdowns, China’s outlook is challenging to say the least. Its construction sector is struggling under extreme debt. Meanwhile, fewer young buyers than ever before see any benefit to investing in the property market. To make matters worse, exports are struggling as consumption habits adjust in overseas markets.

CE points to Amazon’s Q1 results to illustrate a return to pre-COVID demand levels as services rebound. But according to Reuters, China’s factory activity slumped at the fastest pace in two years this past March. In fact, the Caixin purchasing manager’s index slid to 48.1, its lowest reading since the first pandemic wave in early 2020. The official PMI also dipped into contraction territory, slipping below 50 for the first time this year.

New orders are falling particularly fast, reflecting both stalled domestic demand and the disruption to overseas markets. Of course, most of these disruptions result from Russia’s “special military operation” in Ukraine. Regardless, if China’s economic growth slows and industrial and construction demand weakens, the metals forecast from the world’s largest consumer will weaken as well.

Not surprisingly, metals prices have already started slipping. After reaching a high above $10,600/mt last month, copper prices today fell below $9,500. There’s no doubt about it: the bears have returned to short the market. Aluminum has followed copper’s lead despite a March surge caused by the EU’s rejection of Russian supplies. China’s woes are a factor here, too, as the country has been ramping up primary metal output. As a result, semis exports have been rising strongly.

Weighing the Metals Forecast Against Demand

Demand is the prevailing narrative in today’s metals market. As activity in all three regions continues to slow, demand for industrial metals is likely to ease. Still, whether an improvement in global logistics delays remains a leading or lagging indicator is debatable. Either way, there’s no doubt they are gradually becoming less of an issue for metal supply. The bears may be here, but the market has yet to turn their way. Q2 and Q3 will have a lot to say in that discussion.

Stay informed about movements in the metals marketplace with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge. And if you’re looking for a real competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.

Russia’s invasion of Ukraine has sent shock waves throughout global metals markets. However, it’s important to remember that the most consistent longer-term driver of metal prices is Chinese demand. That’s why it’s surprising to see how little attention has been paid to the world’s largest consumer and producer of metals in recent months.

It’s understandable for global news networks to focus on the atrocities uncovered in Ukrainian cities. It also makes sense to counter such reports with more encouraging news, like coverage of the ongoing peace talks. Still, Chinese demand hasn’t gone away nor lessened. Instead, the country’s massive pull on metals prices has merely taken a back seat in the news cycle.

For example:

Energy-intensive base metals like aluminum and zinc have been driven higher by European power costs. Copper, on the other hand, has largely traded sideways as the market looks to China for direction.

Stay updated on fast-changing metal commodities by following the weekly MetalMiner newsletter here

China’s Ongoing Challenges

Recent PMI and flash data suggests that Chinese consumption is falling and new orders are drying up. This comes on the heels of news that Beijing may be willing to allow growth rates to decline to avoid building up more debt. To make matters worse, China is also trying to tackle widespread problems in its property sector.

Capital Economics, veteran China watchers, has issued several reports on this subject. They seem to paint a picture of slowing industrial demand, services suffering from new COVID lockdowns, and property sector challenges. In fact, CE’s April 1st report specifically warned of a sharp fall in the official non-manufacturing PMI from 51.6 to 48.4. This would be the lowest figure since August and is far weaker than most industry insiders were hoping for.

An Intersection of Problems

China’s demand decline is almost entirely the result of the sharp drop in the services index from 50.5 to 46.7. The instant Beijing reimposed movement restrictions and lockdowns, consumers turned more cautious. On top of that, the Chinese industrial activity hit a five-month low in March. This was a full month before Shanghai’s lockdown officially took effect. In the absence of a miracle, April is likely to be much worse.

The longer these trends continue, the more they will impact global metal prices. Indeed, CE goes on to report that most “metal-intensive” sectors have seen rapidly-declining activity for some time now. This is largely due to reduced demand for all metals, copper included. In the absence of a sign that Beijing is planning a major manufacturing stimulus, China’s industrial sector will continue to grind to a halt. In due time, this will seriously weaken economic growth in key export markets like Europe and Japan.

Interestingly enough, this slowing demand is taking place as supply increases. Indeed, China’s power rationing has officially ended. More flexible guidance on environmental targets suggests smelters will soon ramp up output. In fact, according to Reuters, China’s daily aluminum output rose to its highest since mid-2021 in January and February. This was in spite of pollution curbs during the heating season and the Winter Olympics. It’s only fair to assume that March is going to be higher still. Unfortunately, this increased supply is hitting the market as demand slows both domestically and internationally, and logistics problems at ports are again on the rise.

Looking Ahead at Metal Prices

For now, the main narrative affecting metal prices continues to be the war in Ukraine, Russian sanctions, and European power costs. Still, as markets find workarounds and short-term solutions, the issue of Chinese demand will again move to the forefront.

One intriguing graph CE released today shows China PMI’s and Industrial metals as measured by S&P’s GSCI Index.

Historically, the Caixin and Official Manufacturing PMIs tend to correlate with a broad measure of commodity prices, which is clearly visible on the chart. However, rising European energy prices and the invasion of Ukraine have had a short-term impact on that relationship. That said, the connection is likely to reassert itself in the near future. When it does, the question is, will it result in a sharp uplift in Chinese economic activity or a fall in commodity prices?

We can speculate all we want. But for what it’s worth, my money says we’ll see lower commodity prices come next year.

The best way to stay informed about metal indices is Metal Miner’s monthly MMI Report. Sign up here to begin receiving it completely FREE of charge. For a real competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.

In 2018, a pair of us on the MetalMiner team attended the “premier aluminum conference in Europe” — Aluminum 2018 Dusseldorf. Although Dusseldorf felt like a charming Ohio blue collar town with good beer, one of us left the event with a deep cough (obviously pre-Covid). Oddly enough, the weather alert app kept displaying daily ozone levels in the “high” or “extremely high” range. As a puzzled American, one of us appeared confused and the other, thankfully knowledgeable. The cough comes down to the type of energy now used in Germany, coal. MetalMiner’s European colleague quickly explained that after the Japanese Fukushima nuclear disaster, Germany implemented a plan to shut down its entire nuclear operations no later than 2022. 

Source: MetalMiner CEO Lisa Reisman

In hindsight, that decision by Germany appears both foolish and ironic. Foolish because Germany has lost its negotiating power (pun intended) with Russia for which it relies.  It’s ironic because the country already had “clean energy” but now must turn back to dirty energy to avoid blackouts.

Join the MetalMiner team on Wed March 2, 2022 at 11:00-11:30 for a market outlook on the impact of the Russian invasion on aluminum and steel prices.

In the meantime, while the world watches the Russian invasion and also the impact of sanctions, (we’ll venture a guess that they will have minimal impact), the MetalMiner analyst team discussed Europe’s energy situation and the impact on various metals markets.

On stability of the electric power grid in Europe

Have you ever stood in a field and felt a constant breeze for hours with no interruption at all? Well, we haven’t either. However, if you think wind comes and goes how about relationships with other countries like Russia?  Perhaps one can conclude that renewables serve best as supplemental energy sources, certainly not primary sources. When Texas needed to fly helicopters with jet fuel derived from oil to thaw out windmills, clearly the grid did not perform as planned. This begs the question: will the move to green energy continue and will it pull up metals prices needed to support green energy initiatives? If the trend does not continue, one might expect a sharp reversal for several metals. 

Evidence that the US power grid has weakened

Home and commercial generator manufacturer Generac has seen a big uptick in home generator sales according to this recent article. Heck, even one of our analysts recently purchased a natural gas generator from Generac to shore up a weaker local power grid. And CEO Aaron Jagdfeld confirmed rising sales in Russia and the Ukraine by stating, we’re seeing interest in Russia and Ukraine which arguably might be related to some of the security concerns short term.”  

To us, this represents a sure sign that people know the grid appears unsustainable. The green narrative centers around climate change as the root cause of more severe weather but the other factor relates to the unreliability of green energy and power companies have failed to make the investments in back-up energy sources needed to support wind and solar. Green energy goes down far more often than either nuclear or coal plants.

Read more

While inventory levels serve as an interesting measure for fundamental analysis, that measure remains irrelevant for the short term. But when inventory levels change dramatically and over a longer time frame, they can have both an impact on price and also reflect more profound changes within the market. Ultimately, if not immediately, those factors could impact prices.

Both exchange traded and shadow, off-warrant, stocks have declined for a year now. After increasing sharply during lockdowns in 2020, global logistics delays hampered replenishment. The rapid global economic bounce back has seen those inventories drawn down again. In that respect, exchange stocks have done their job. The market’s indifference to first the rise then fall in inventory levels makes sense. However, Overall, LME inventory for example, rose by 1.25 million tons in 2020. A 908k ton jump in so-called shadow stocks, a recent Reuters post reports, dwarfs the 337,000-ton increase in registered inventory. But since then, total LME stocks fell by 2.2m tons last year. Shadow stocks fell the fastest. By the end of December 2021, they totaled under 340k tons.

MetalMiner will discuss the inventory issue as it relates to aluminum and carbon steel prices in its monthly  webinar on Wed March 2 at 11:00am

Shadow stocks and LME inventory drop

Aluminium drove much of the change. China’s energy constraints drove a surge in aluminium imports such that LME aluminium inventory fell by 406k tons last year. Moreover, they have continued to fall some 79k tons this year. Shadow stocks (the most easily accessible for quick delivery) stood at just 297k tons at the end of December down form 1.58m tons a year earlier. Meanwhile, copper shadow stocks shrank by 90% to just 13k tons at the end of December. Shadow stocks of nickel fell by 92% to 2.7k tons, those of zinc by 81% to 23.5k tons and shadow lead stocks saw a paltry 876 tons at the close of 2021, Reuters reports.

Shanghai Futures Exchange (SHFE) copper stocks stood at an even more depleted 40,359 tons going into the Chinese new year holiday period according to a recent Reuters post. Meanwhile, total copper inventory across all three exchanges – LME, SHFE and CME – reached 200,402 tons at the end of January. It fell by 73,000 tons last year, the fourth consecutive annual decline. Furthermore, LME shadow stocks have disappeared even faster the post adds, with the total at the end of November of 18,945 tons. The represents the lowest inventory level since the exchange first started publishing these monthly figures.

Source: MetalMiner Insights

Energy crisis and Russian situation support base metal prices

Yet the market has barely acknowledged the draw downs. Base metal prices have support due to the worries over energy costs and supply constraints. In addition, the fear of sanctions on Russia if the geopolitical crisis in Ukraine spirals out of control has also lent price support. Indeed, copper has languished, somewhat rangebound. This, despite over fears of a slowing Chinese economy hitting demand for copper. Other electrification metals like Lithium and Cobalt, however, have powered higher.

The market appears fixated on fears of a slowing Chinese economy and blind to the precarious inventory position of metals like copper, nickel and aluminium. But while economic stability remains a central plank of Beijing’s policies, according to China Briefing this week, the Central Economic Work Conference stated at their annual conference that the government would “appropriately front-load infrastructure investment” for 2022. Infrastructure investment will likely appear narrower than in previous cycles, more focused on long term goals. However, China will likely serve as the only G7 country to loosen monetary policy this year. Moreover lower interest rates could appear in the cards for China. Beijing seems intent on managing steady growth this year. As such, while copper consumption will not see the building boom boost of previous decades, consumption will unlikely fall.

Lack of supply chain inventory still an issue

Part of the narrative for high prices last year came down to global logistics delays and capacity issues forcing ocean rates higher. But many expected those pressures to ease after the Chinese New Year as covid restrictions slowed. Ocean rates, however, remained persistently high with rates out of India increasing again over recent weeks, undermining hopes of lower metal prices in the short term. Much will depend on the headline issues of Russia-Ukraine and energy prices. However, the lack of supply chain inventory continues to grow. A simple old-fashioned lack of metal may give the next boost to metal prices.  Buyer beware.

Many metals consumers normally buy if not spot then on a three-to-six-month time horizon. Still others book up to a year out. Those that fix for longer periods often publish annual sales price lists. These companies need to fix input costs to protect margins. However, that too comes at a cost. Of course there is a price to pay for such certainty in the form of higher premiums. For those with more flexibility in sales prices or those with lower metal amounts in their cost of goods sold, then variable input costs are acceptable, if not an unwelcome, risk.

Organizations that hedge their purchases can use forecasts to set their hedging strategies. 

So news from a recent Reuters poll of analysts that base metals prices could fall later this year and more significantly in 2023, does not provide much comfort in what remains an inflationary metals price environment.

Declining base metal inventory levels

Many will look at the surge in base metals prices since the first lockdowns. They have, afterall, risen by up to 93% since 2020. Indeed, some climbed 38% over just the last year. This almost creates an  an inevitability about them.  Furthermore, the dwindling exchange inventories point to supply deficits across the metals spectrum (with the exception of lead it should be noted). Goldman Sachs maintains their position that the world stands short of base metals. In addition, the bank continues to hold firm its super-cycle position that prices have further to go.

Sign up for the weekly MetalMiner newsletter to see our outlook on price for 2022.

Last boom from rising demand from China

But the main driver of metals prices increases in this century, came from rising demand from China. Finally, after two decades of unprecedented growth over such a short period, China’s growth looks fragile. The post notes Chinese factory activity has slowed.  Both official and the Caixin purchasing managers indices slipped in January. The latter dropping to a 23-month low, according to Capital Economics, “…with Chinese demand unlikely to bounce back meaningfully this year, we continue to expect sharp falls in industrial metals prices by year-end,” the firm revealed.

That appears rather bold.

China’s weakened construction sector and energy crisis

Part of China’s weakening demand picture involves its construction sector. Evergrande the largest player along with many smaller firms, continues to struggle. Indeed, the dire state of the property market has pushed one state into losses trying to fund the winter Olympics investment. Its returns from construction have failed to meet budgets. China, however, suffers more than mere construction woes.  It also shares an energy crisis with Europe.  China’s structural over reliance on certain fuel types for energy production has contributed to energy rationing. This has impacted both metals output and demand. Coal remains the problem for China. Meanwhile natural gas shortages plague Europe. Both have resulted in reduced metals smelting and supply. In addition, both should ease with warmer weather and reduced electricity demand as spring approaches.

Aluminum, copper and tin prices

Analysts polled forecast aluminium to hold an average price in 2022 of $2780 per metric ton. Aluminum prices have already hit nearly $3100/mt so that leaves a lot of downside for later in the year. Copper seems particularly out of favor Reuters observes. The report says this year’s median forecast of $9,370 per ton is only 0.6% higher than last year’s cash average. Moreover, the price is expected to fall further to an average $8,700/mt next year. That softening of demand will likely lead to current supply deficits reversing to surpluses for some metals. Copper’s supply deficit of 37,000 tons could turn into a surplus of 286,000 tons in 2023.  Only aluminium and tin will likely remain in supply shortfall next year. Zinc will likely come in balanced. Whereas nickel and lead could both record supply surpluses.

Our free MMI monthly reports serve as an inflation index for specific metals markets

Prepare for volatility

In the short term, to the disappointment of buyers, volatility rather than lower prices will likely remain the norm.  Towards the second half of the year, and certainly into next, a recovering supply scene and cooling demand, expected by many analysts could result in a softening of prices from current levels.

Hardly a super cycle.

The Copper Monthly Metals Index (MMI) held flat at 119 from January to February. 

Copper prices continued to trade sideways within tighter and tighter ranges, with no clear short-term price direction. Nonetheless, copper prices remain bullish on longer time frames. 

Chilean assembly considers copper nationalization

Members of an environmental committee in Chile voted for mine nationalization on Feb. 1. The proposal for “the Nationalization and New Social Environmental Management of Copper Mining, Lithium and other Strategic Assets” passed with 13-to-6 approval.  

In spite of this early advance, the future of such a drastic change remains far from certain. Chile elected leftist President Gabriel Boric last year who will take office in March. Boric campaigned on increasing mining royalties and additional social services. Chile’s Congress, however, remains strongly divided. As such, any reforms will require moderation to pass. The nationalization proposal was widely controversial. Its adoption would require two thirds support of the full assembly. From there, it would become part of the draft charter set for a referendum vote later in the year. Chile has undertaken the process of a constitutional rewrite. The current constitution originated under the Pinochet dictatorship. 

Stop obsessing about the actual forecasted copper price. It’s more important to spot the trend

Mining royalty bill approved by Chile senate commission

Meanwhile, a mining royalty bill continues its way through Chile’s legislature. An earlier version of the bill included a 3% tax on producers whose volumes exceed 12,000 tons of copper per year. The bill also included a progressive royalty based on the copper price.  This bill passed an initial vote in late November. Following staunch industry pushback, the bill was subsequently amended. 

In the latest version, royalties would reflect the value of gross copper sales and profitability. Mines whose output levels do not reach 50,000 metric tons would remain exempt. Mines with production up to 200,000 metric tons annually, would face a tax that corresponds to 1% of annual sales. For the mines that exceed those volumes, the royalty applied would reflect the average annual LME copper price.

The bill will now go to the Senate Treasury Committee. It will then go to a plenary session of the chamber before it returns to the lower Chamber of Deputies. Should the bill successfully pass through this process, it could become law as early as March. Multiple countries including Chile have considered proposals to increase royalties and taxes on mining activity.

Stay up to date on MetalMiner with weekly updates – without the sales pitch. 

Russia looks to grow copper output

While Russia serves as a leading producer of both aluminum and nickel, it also boasts roughly 10% of the world’s copper reserves. Globally, only Chile and Peru’s copper reserves rival Russia’s. Alongside climbing copper prices and expectations of strong future demand, miners look to cash in. Russia intends to begin mining at Udokan as well as an additional Siberian reserve, Baimskaya. 

Both projects pose challenges. Udokan, among the world’s largest untapped reserves, as it holds upwards of 26 million tons of copper, requires the removal of a mountaintop to access its copper ore. Such constraints have prevented its development until now. After it was acquired in 2008 by USM Holdings and following a staggering $7 billion of investments, the mine could begin production in 2022. By 2026, annual production will reach 400,000 tons.

Baimskaya is situated within the Arctic Tundra. Its remote location poses logistics constraints as it lacks access to a railroad or port and would require a floating nuclear power plant in the Arctic Ocean to source its energy. Once complete in 2027, the mine will produce around 300,000 tons of copper annually. 

Between both projects alongside others, Russia will become the fourth-largest copper producer in the world by 2030, with total production exceeding 2 million tons per year.

Better time your metal market purchases, including copper, with the MetalMiner Insights platform. Request a demo.

Actual metals prices and trends

The LME three-month copper price fell by 1.48% month-over-month to $9,539 per metric ton as of Feb. 1.

Chinese copper primary cash remained at $10,916 per metric ton. Chinese copper scrap fell by 0.88% to $9,991 per metric ton. 

US copper producer grades 110 and 122 fell by 1.49% to $5.28 per pound. Producer grade 102 rose by 1.1% to $5.50 per pound.

This morning in metals news: LME copper prices have ticked up; the U.S. monthly trade deficit increased from October to November; and, lastly, WTI crude prices made some gains this week.

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Copper prices rise

copper mine in Peru

Jose Luis Stephens/Adobe Stock

Copper prices had trended firmly in between MetalMiner support and resistance levels for much of Q4 2021.

However, copper prices have showed signs of upward momentum.

The LME three-month copper price closed Tuesday at $9,759 per metric ton. The price had increased 2.94% month over month, MetalMiner Insights data indicate.

US trade deficit reaches $80.2M in November

The U.S. trade deficit reached $80.2 billion in November, the Census Bureau and Bureau of Economic Analysis reported.

The deficit increased from $67.2 billion in October.

Read more

This morning in metals news: U.S. Steel released its guidance for Q4 2021; U.S. job openings increased in 16 states in October; and, lastly, copper prices continue to trade sideways.

Do you know the five best practices of sourcing metals, including steel?

U.S. Steel releases Q4 guidance

U.S. Steel logo

Игорь Головнёв/Adobe Stockk

U.S. Steel said it expects its Q4 2021 adjusted EBITDA to come in at $1.65 billion.

“Next year, our fixed price contracts are resetting significantly higher, providing better earnings stability compared with competitors with more spot exposure,” CEO David B. Burritt said. “Additionally, incremental demand drivers are materializing, and we believe the steel industry super cycle will continue. Our fourth quarter guidance indicates another quarter of strong performance yet reflects a temporary slowdown in order entry activity, which we believe is related to typical seasonal year-end buying activity.”

The firm said its flat-rolled segment would deliver EBITDA of $1 billion.

“The strong performance is driven by increased flow-through of higher steel selling prices offset by cautious seasonal buying and higher raw material and energy costs,” the firm added.

Job openings rise in 16 states

U.S. jobs openings increased in 16 states in October, the Bureau of Labor Statistics reported.

Openings declined in two states and were relatively unchanged in 32 states. Hawaii, Minnesota and Kentucky posted the largest increases in job opening rates.

Copper continues to move sideways

In the copper market, copper prices have continued to move sideways over the last six weeks.

The LME copper price closed Wednesday at $9,495 per metric ton, per MetalMiner Insights data. The price fell 2.4% month over month.

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