copper price

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This morning in metals news, the Canadian government announced it is rolling out $100 million in funding for its domestic steel and aluminum industries, copper moves toward a seven-month high, and Vietnam’s steel exports to the U.S. increased in 2018.

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Canadian Steel, Aluminum Get a Boost

The Canadian government has announced it will offer $100 million in funding to small- and medium-sized aluminum and steel firms in the country, the CBC reported.

The U.S.’s Section 232 tariffs on steel and aluminum remain in place for NAFTA partners Canada and Mexico. Those tariffs are the primary point of contention as the successor to NAFTA — the United States-Mexico-Canada Agreement (USMCA) — still needs to be ratified by the three countries’ legislatures.

Copper Continues Hot Streak

The copper price moved toward a seven-month high on Tuesday, Reuters reported.

LME copper jumped 1% to $6,472.50 per ton, according to the report.

Vietnam Steel Sector Grows

Despite the U.S.’s aforementioned Section 232 tariffs, one southeast Asian country saw its steel exports to the U.S. rise last year.

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According to an S&P Global Platts report, Vietnam’s finished steel exports to the U.S. surged 48% in 2018 compared to 2017.

On the heels of the doldrums of December, metals prices have made gains through the first two months in 2019.

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February was an especially strong month for a number of metals.

However, markets are especially sensitive to any snippets of news coming out of the ongoing U.S.-China trade talks. President Donald Trump recently delayed the March 1 deadline for a planned tariff rate increase as talks continued.

Whether the two countries reach a meaningful deal anytime soon remains to be seen; as of now, however, metals prices are enjoying a bit of upward momentum.

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In January, the Copper Monthly Metals Index (MMI) dropped 3.9%, falling back 3 points to the November 2018 level of 74. Lower LME copper prices drove the index lower.

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Similar to other base metals, LME copper prices fell in December. LME copper prices fell below the $6,000/mt level, which served as a stiff resistance level for most of 2017. Prices over this level indicate a bullish copper market, while prices below that level signal a more bearish trend. This level has represented a psychological signal for “Doctor Copper” since 2017.  

LME Copper prices. Source: MetalMiner analysis of Fastmarkets

So far in January, LME copper prices have increased. However, current levels remain below that $6,000/mt psychological ceiling. Trading volume also appears weaker, which does not support a sharp uptrend.

Global Copper Outlook

According to data released in January, Chilean copper production reached 540,720 tons in November, the highest level in 13 years. The increase was driven by higher ore grades and more efficient processes. As reported by Chile’s national statistics agency INE, copper production increased 7% in November versus October. Production reached its highest levels  since December 2005.

Anglo American announced that overall production will increase more than expected between 2018-2021. Forecasts suggest 2018 production increased by 2%, driven by increases in copper output. 2019 production could increase by another 3%, and 2020-2021 production by an additional 5%.

Despite this forecast by Anglo American, the International Copper Study Group (ICSG) announced a wider deficit in September. The global refined copper deficit increased to 168,000 tons in September from the previous 43,000 tons in August. For the first nine months of 2018, the market saw a 595,000-ton deficit versus the previous year’s deficit of 226,000 tons.

Chinese Scrap Copper

LME copper prices and Chinese copper scrap prices tend to follow the same trend. However, this month they traded differently. LME copper prices fell while Chinese copper scrap prices increased. The divergence between LME copper prices and Chinese copper scrap has become more notable recently, driven by lower scrap availability in China.

Source: MetalMiner data from MetalMiner IndX(™)

The spread has become smaller this month. The wider the spread, the higher the copper scrap consumption, and therefore, the price.

What This Means for Industrial Buyers

LME copper prices fell this month, moving below the $6,000/mt level. Buying organizations will want to understand how to react to the latest copper price movements. Adapting the “right” buying strategy becomes crucial to reduce risks. Only MetalMiner’s Monthly Outlook reports provide a continuously updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

Click here for more info on how to mitigate price risk all year round — and get a free 2-month trial to our Monthly Metal Buying Outlook.

Actual Copper Prices and Trends

In December, most of the prices that comprise the Copper MMI basket fell. LME copper decreased by 4.87% this month. Indian copper prices also fell by 5.91%, while Chinese cash primary copper prices decreased by 3.83%. Prices of U.S. copper producer grades 110 and 122 fell by 3.36%. Meanwhile, the price of U.S. copper producer grade 102 decreased by 3.2%, to $3.64/pound.

In July, the Copper Monthly Metals Index (MMI) fell by three points, falling to its lowest value since October 2017. The Copper MMI currently stands at 81 points. The decrease came as a result of falling LME copper prices as well as other elements that make up the Copper MMI.

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Source: MetalMiner analysis of FastMarkets

So far, LME copper prices have followed last month’s downtrend.

LME copper prices have remained in a short-term downtrend since prices peaked in June at $7,316/mt. Since then, LME copper prices have fallen by more than 12%.

The downtrend appears sharp, as copper prices have fallen to October 2017 levels. However, trading volumes do not appear in the same sharp downtrend, instead looking flat. Therefore, copper prices may just be seeing a bigger buying dip, caused by weaker summer demand and trade tensions.

Trade Tensions Also Affecting Copper

Copper prices have also struggled this month due to trade tensions between China and the U.S.

China accounts for almost half of global copper consumption, estimated at around 24 million tons. Fewer Chinese exports also affect copper prices.

Copper investors seek to reduce risk until the trade tension abates. This, together with weaker demand in China, have supported the downtrend.

Chinese Scrap Copper

Since the announcement of the ban on copper scrap in China last summer, MetalMiner has followed Chinese copper scrap prices closely.

Source: MetalMiner data from MetalMiner IndX(™)

LME copper prices and Chinese copper scrap prices tend to follow the same trend. Both appear to be in a long-term uptrend. However, both LME copper and scrap copper prices fell again this month. Despite both following the same short-term downtrend, the spread has widened. The wider the spread, the higher the copper scrap consumption, and therefore, the price.

However, Chinese the copper scrap ban has boosted copper production in other forms.

In May, Chinese copper imports reached their highest levels in 17 months, with imports totaling 475,000 tons of unwrought copper and copper products. Strong manufacturing and construction sectors have led Chinese demand.

What This Means for Industrial Buyers

Despite the recent dip, LME copper prices remain in a long-term uptrend.

Buying organizations reading the Metal Monthly Outlook had the opportunity to identify a buying signal at the beginning of April and reduce price risk by purchasing some volume. For those who want to understand how to reduce risks, take a free trial now to the MetalMiner Monthly Outlook.

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Actual Copper Prices and Trends

In July, most of the prices comprising the Copper MMI basket decreased.

LME copper fell by 2.77% this month. Indian copper prices decreased by 2.81%, while Chinese primary copper prices fell further by 3.40%.

Prices of U.S. copper producer grades 110 and 122 decreased by 2.62%. Meanwhile, the price of U.S. copper producer grade 102 fell by 2.49%, to $3.91/pound.

The ongoing turmoil over Donald Trump has increased investors’ worries over political stability in the U.S. In addition, investors worry that under these political turbulences, the Trump administration will struggle to implement pro-growth initiatives.

The dollar is one asset that was affected by the news, falling to a 6-month low. Investors have been selling dollars and buying euros as political risks rise in the U.S. and, following the French elections, fall in Europe.

Two-Month Trial: Metal Buying Outlook

Usually, a falling dollar would give a boost to industrial metal prices, but that wasn’t the case here. Precious metals like gold did benefit from a falling dollar, but it didn’t prevent base metals from declining. This is because investors are now focused on what looks like a slow down in China.

Investors were disappointed when China’s Caixin Manufacturing PMI came at 50.3 in April, the lowest reading since September 2016. In addition, as Beijing talks about curbing credit, investors have come to realize that lower funding for the construction of infrastructure projects will hurt demand for industrial metals.

Just about two weeks ago we noticed that commodity markets were getting in trouble. As time goes on, that weakness is spreading out into industrial metals. Some specific metals are holding their value better than others due to their specific supply narrative, but overall we would expect them to move in tandem, as they always do. Here are some charts suggesting that the bull cycle in industrial metals could be ending:

Nickel falls to a 10-month low. Source: MetalMiner analysis of fastmarkets.com data

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Copper prices took a hit in May because of a surge in LME inventories. Or… was it because of that?

I’ve pointed out this before, but people continue to talk about copper stocks to explain price movements. LME inventories rose in May by 64,000 tons, or 25%, at the same time that prices fell. But that’s simply a coincidence.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Most of the time, inventory inflows and outflows can simply happen because traders move metal from one destination to another to profit from price arbitrages. Indeed, in November copper prices climbed 20% while LME stocks rose by more than 90,000 tons. I would argue that inventory levels have no predictability on price trends. But then what drove copper prices down?

China to Halt Credit Growth

China is putting efforts on halting risky lending and rising borrowing costs in order to limit credit growth. Interest rates in China have risen to the highest level in two years while the country’s tough talks on curbing credit are expected to put the brakes on credit growth.

As I wrote last week, “the noticeable tightening in Chinese monetary policy is bad news for property markets in China. The country has also pledged to halt risky local funding on the construction of infrastructure projects. Investors know that this will hurt demand for commodities and industrial metals.” Read more

Our Copper MMI fell by two points in April, dragged down by a sell-off in industrial metals. In addition, supply concerns have eased as strikes at some mines ended.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The strike at Escondida in Chile, the world’s largest copper mine, ended in late March. Soon after, a 18-day strike at the Cerro Verde mine in Peru also came to an end. A new strike at the mining company Southern Copper Corp. in Peru took place in April, but it lasted only two weeks, leaving no significant effect on production.

Meanwhile, Freeport McMoRan finally obtained a permit to export material from its Grasberg mine, the second largest copper mine in the world. The new permit will allow the company to export 1.1 million tons of copper concentrate through February of next year.

However, Freeport now has a new problem on its hands. Workers have threatened a one-month strike starting in May. The company had laid off about 10% of its workers, saying that there may be more layoffs in the future to stem losses. Moreover, the company is still confronting Indonesia over rights to the mine. With this problematic combination of protests from workers and tensions with the Indonesian government, it’s no wonder that investors are concerned about further supply disruptions this year.

What This Means For Metal Buyers

Although supply disruptions eased in March and April, there is overall plenty of potential for further disruptions this year. Prices took a dip in April, but that seems to be a normal price action given that most industrial metals fell in the same month.

Free Sample Report: Our Annual Metal Buying Outlook

After a spectacular rally in Q4 of last year, prices are now consolidating in the price range of $5,500-$6,100/mt. Bulls seems still in control but they probably need another bullish development to chase prices above this price range. That development could come in the for of additional supply disruptions this year. We will be watching closely the developments at the Grasberg mine in the coming week in addition to the several mines that have contract negotiations due to this year.

Actual Copper Prices and Trends

 

Set of copper pipes of different diameter lying in one heap

The copper industry is still reeling from its crisis of plummeting prices, but hope is on the horizon and a recovery is underway albeit a gradual one.

According to a recent report from Reuters, falling prices led to a reduction in output, but industry executives announced this week in a meeting in Chile, a top producer nation of the metal, that any recovery will be a slow one.

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“The market seems to have left behind its worst moment, although it’s very premature to anticipate a new cycle of high prices,” Chilean Mining Minister Aurora Williams told the conference, according to Reuters.

Arnaud Soirat, copper and diamonds unit chief at Rio Tinto added that copper prices could receive support from external factors, including pending mine closures and ore grade decline.

“Copper’s long-term fundamentals are quite positive, and we expect to see further demand growth from emerging markets,” he told Reuters, forecasting a small deficit this year.

Copper Prices on Upward Trajectory?

Reuters also reported that copper consultancy CRU is projecting copper prices to trend upward over the next 3-4 years.

Said Vanessa Davidson, director of copper research: “We expect pressure on costs to continue…but we see copper prices rising faster than operating costs, ensuring that profit margins increase.”

How will copper and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Copper prices continued to trade flat in March. Over this month, strikes at major mines Escondida and Cerro Verde ended while Freeport-McMoran got a temporary export permit for its Grasberg mine.

Escondida’s Strike Ends

The strike at the world’s largest copper mine, Escondida in Chile, ended in the final week of March. The strike had lasted 44 days, longer than expected.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The mine is not rushing to ramp up back to prestrike output levels. Owner BHP Billiton has said will outline the impact of the strike on Escondida’s output in results due for release on April 26. The strike is estimated to have cost Escondida more than 200,000 metric tons in copper production.

Copper MMI

Workers at the mine voted to return to work, despite not having reached an agreement on a new pay deal with management. Instead, workers extended their existing contract by 18 months, losing out on a new signing bonus or wage increase, but they will be able to renegotiate a new deal in 2018 after a new pro-union Chilean labor law goes into into effect.

Cerro Verde Mine Resumes Operations

Cerro Verde, Peru’s largest copper mine, had been operating at 50% of capacity since workers initiated a strike on March 10. At the end of the month, workers signed an agreement as the union accepted the company’s offer to improve family health care benefits and pay workers their portion of the mine’s profits earlier than usual. The mine produced just under 500,000 mt of the red metal last year.

Grasberg Mine Gets Temporary Export Permit

Freeport-McMoran was granted a temporary permit to export copper concentrates from its Grasberg mine in Indonesia, the world’s largest gold mine which also produces copper. The new permit broke a 12-week deadlock that had cut supply to Asian smelters. The new export license will last eight months. The amnesty means the company can renew deliveries of copper concentrates in Asia after declaring force majeure in February, but longer-term discussions over the company’s rights in Indonesia have yet to be determined.

What This Means For Metal Buyers

Copper supply disruptions have lasted longer than expected. Although they seem to have come to an end, their impact on supply still need to be outlined. In addition, these strikes have set the case for wage negotiations across the industry.

Two-Month Trial: Metal Buying Outlook

Some major contract negotiations in large mines are due in the coming months. In the meantime, copper investors might focus their analysis on macro factors such as the ongoing China-U.S. trade negotiations, the performance of the U.S. dollar and global demand for industrial metals.

 

If I was a copper miner, I would be rubbing my hands because copper prices are looking healthy as a horse.

Supply Disruptions

Workers at Cerro Verde mine in Peru walked out on Friday, “halting output of 40,000 metric tons per month in a dispute over labor conditions,” according to news.com.au (here’s a video interview and analysis I did about it for Swiss Financial Television). The strike stretched into its fourth day yesterday after a meeting between the union and management failed to resolve it on Monday. “The mine is currently making about half as much copper as it normally does, because owner Freeport-McMoran hired contract workers to operate key areas,” said a union official as quoted by Reuters.

Benchmark Your Current Copper Price by Grade, Shape and Alloy: See How it Stacks Up

On top of this, disruptions at the world’s two largest copper mines, Escondida in Chile and Grasberg in Indonesia, are causing them to “lose production daily due to a strike and an export ban respectively,” according to Reuters.

The Technical Picture

Three-month London Metal Exchange copper. Source:MetalMiner analysis of fastmarkets.com data.

The technical picture is important because it tells a lot about what buyers and sellers are doing. Copper rose nearly 30% in November. Usually, after such a huge run it’s normal to see some selling but we haven’t really seen that yet.

Two-Month Trial: Metal Buying Outlook

Since November, prices are holding pretty well and that’s a sign that bulls are still in control. A sharp price decline in oil prices last week would normally bring other commodities down but copper held its ground well. The red metal continues to make higher highs and higher lows, a textbook definition of a healthy uptrend.

What This Means For Metal Buyers

The diagnosis is that while copper’s bull market doesn’t show real signs of weakness, we continue to expect further upside moves. Buyers should keep an eye on the ongoing supply disruptions because they could hurt your budget.