copper price

The Copper Monthly Metals Index (MMI) fell 1.7%, as the copper demand picture could be set to weaken and the LME three-month and China primary cash prices fell month over month.

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The Fed effect and Congress delays

As the Federal Reserve prepares to scale down its pandemic strategy, copper prices dropped. The Fed reported it would hike rates and pare back the asset purchase program (i.e., quantitative easing).

This news benefited the U.S. dollar, which increased over the past month. This is particularly important to copper. The U.S. dollar and commodities have historically moved in a perfect inverse relationship.

Moreover, Congress’ decisions — or lack of them — could cause market turmoil and impact copper prices. The bipartisan infrastructure deal remains delayed in the House of Representatives.  Congress has not taken action on increasing the debt ceiling, adding to the potential market turmoil, though it does appear that Republicans have agreed to a short-term debt ceiling cover into December.

China looming over prices

Meanwhile, the second-largest economy in the world continues to show signs of volatility.

China is the biggest consumer and producer of refined copper. Its latest issue involves a power crisis that has impacted both copper production and also manufacturing. Both have experienced restrictions.

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The Copper Monthly Metals Index (MMI) decreased by 3.4% in August, as forms of the metal included in the index dropped (with the exception of Chinese copper scrap).

September 2021 Copper MMI chart

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Copper prices trend downward

Similarly to the index, LME copper prices dropped by 3.3%. LME trading volumes spiked as the price declined from Aug. 16-19. This sell-off signaled a strong negative trend.

Since then, prices recovered. However, trading volumes remained muted, reinforcing the negative market sentiment.

SHFE prices behaved similarly to LME prices. Meanwhile, the volatility of the dips did not appear as strong. The SHFE’s heaviest trading volumes occurred toward the end of the month, when prices jumped, thus signaling a strong positive indicator.

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This morning in metals news: Hurricane Ida made landfall in Louisiana on Sunday; copper prices have bounced back in the final third of August; and, lastly, Alro Steel has acquired metal distributor and service center Metal Stock.

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Hurricane Ida hits Louisiana

hurricane image

Mike Mareen/Adobe Stock

Hurricane Ida barreled down on the Gulf Coast over the weekend, making landfall in Louisiana on Sunday.

On Friday, the Energy Information Administration summarized the potential energy impacts of the Category 4 storm.

“Typically, demand for transportation fuels increases rapidly in the days before the arrival of a hurricane in the affected areas as consumers purchase fuel to prepare for evacuation,” the EIA noted. “This rapid, unexpected increase in demand puts pressure on local inventories because the rest of the supply chain has not had time to respond. Louisiana has declared a state of emergency ahead of Hurricane Ida’s landfall.”

The EIA maintains a mapping system that displays energy disruptions in locations with active storms.

Furthermore, in terms of trade, the Port of New Orleans is the fourth-largest port in the U.S. The port authorities said New Orleans Terminal and Ports America for containerized operations would be closed Monday, Aug. 30.

Copper bounces back

Despite supply concerns at mines around the world, particularly in South America, the copper price lost steam in the first half of August.

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While copper mine supply concerns have cropped up of late — as MetalMiner’s Stuart Burns explained recently — output during the first five months of the year rose by 4.8%, the International Copper Study Group reported Friday.

Receive the latest short-term and long-term outlook for the full range of industrial metals (base and ferrous) at the annual MetalMiner Forecasting Workshop on Aug. 25

Copper mine production

copper mine

Gary Whitton/Adobe Stock

Global copper mine production rose by 4.8% during the first five months of the year, including a 6.5% rise in concentrate production and a 2% decline in solvent extraction-electrowinning.

No. 1 copper producer Chile saw its output drop by 2% in the five-month period. Chilean concentrate production rose by 2%, while extraction-electrowinning fell 13%.

Meanwhile, Peru, the No. 2 copper producer, saw its output rise by 17% year over year. However, Peru’s copper mine production fell by 7% compared with the equivalent five-month period in 2019.

Elsewhere, Indonesia’s copper mine production surged by 72%, mainly due to ramp-up at the Grasberg mine.

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Dial back to the sentiment earlier this year and copper would be powering through $11,000 per metric ton with today’s fundamentals. However, it has spent much of the last month bobbing around the mid $9,500 per metric ton mark (currently sub-$9,400 for cash).

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Copper supply news

copper mine

vadiml/Adobe Stock

Copper is normally sensitive to supply concerns.

So, the news that three mines are out of commission should be of significant support.

Reuters reported this week that although a walk-out at the world’s largest mine, Chile’s Escondida, was averted at the 11th hour this month, strikes began at the Caserones and Andina mines last week.

Union leaders at Caserones didn’t even wait for the full 10-day mediation period to end before walking off the job, Reuters reported. The mine produced 127,000 metric tons of copper last year.

Meanwhile, Codelco’s Andina mine is currently operating at a reduced rate after the start of strike action last Thursday. Andina produced 184,000 tons of copper in 2020.

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With all eyes on the labor situation at BHP’s Escondida copper mine — the world’s largest copper mine — global copper supply could get a lot tighter if the situation leads to a prolonged strike.

In 2017, workers at the mine engaged in a 44-day strike.

However, at least through the first four months of the year, the International Copper Study Group (ICSG) estimated the global copper market posted an apparent surplus of 70,000 metric tons.

Receive the latest short-term and long-term outlook for the full range of industrial metals (base and ferrous) at the annual MetalMiner Forecasting Workshop on Aug. 25

Copper production up 4% through four months

copper mine

Gary Whitton/Adobe Stock

Meanwhile, the ICSG estimated global copper production rose by 4% through the first four months of 2021 compared with the same period in 2020.

Furthermore, concentrate production rose by 6% and solvent extraction-electrowinning fell by 4%.

In Chile, the world’s top copper producer, copper mine production fell by 2%. Chile’s concentrate production rose by 3% but solvent extraction-electrowinning fell by 16%.

However, the union representing workers at BHP’s Escondida mine in China voted to reject the company’s latest contract offer. The two sides have entered a mediation period, after which the union can launch a strike if an agreement cannot be reached.

Elsewhere, No. 2 producer Peru saw its copper mine production rise by 10% year over year during the four-month period. However, Peru’s production during the period fell by 27% compared with the first four months of 2019.

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This morning in metals news: General Motors reported strong Q2 sales in China; miner Anglo American said it had completed its first maritime biofuel trial; and, lastly, the copper price has trended sideways so far in July.

Receive the latest short-term and long-term outlook for the full range of industrial metals (base and ferrous) at the annual MetalMiner Forecasting Workshop on Aug. 25

General Motors reports strong China sales in Q2

General Motors headquarters

lindaparton/Adobe Stock

General Motors reported its Q2 sales with its joint ventures in China rose by 5.2%.

The automaker said vehicle deliveries totaled more than 750,000.

“The growth was driven by luxury and premium vehicles, midsize/large SUVs and MPVs, including the Cadillac CT5 and XT6, and Buick LaCrosse, Enclave and GL8 family,” GM said. “Sales of new energy vehicles (NEVs) across GM’s brands also posted a strong performance.”

GM also touted the expansion of its Ultium platform to China.

“In addition to offering popular EVs underpinned by SAIC-GM-Wuling’s locally developed GSEV platform, GM is bringing to China its advanced global EV platform – Ultium – which will empower a range of multi-brand and multi-segment EVs,” GM said. “The first Ultium-based model for China, the Cadillac LYRIQ all-electric SUV, made its global public debut at Auto Shanghai 2021, before it goes on sale early next year.”

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The Copper Monthly Metals Index (MMI) decreased by 7.3% for this month’s reading, as copper prices declined.

July 2021 Copper MMI chart

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Copper stock

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.

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Global copper mine production rose by 3.7% in the first quarter of 2021, the International Copper Study Group (ICSG) reported this week. The group estimated an apparent global copper surplus of 130,000 metric tons.

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Copper mine production gains to start the year

copper mine

Gary Whitton/Adobe Stock

Global copper mine production recovered during the first three months of the year, the ICSG reported this week.

Concentrate production rose by 5.5%, while solvent extraction-electrowinning fell by 3.5%.

“Output in Peru, the world’s second biggest copper mine producing country, increased by 3% mainly because March production was up by 18% from a constrained March 2020 basis,” the ICSG reported. “However, Jan-Mar 2021 production is still 10% below that of Jan-Mar 2019.”

Earlier this month, Stuart Burns delved into Peru’s ongoing COVID-19 crisis, plus its recent presidential run-off.

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It would seem Beijing only has to speak and the market reacts — this time, it’s about base metals.

Worried by what it sees as excessive inflation in commodity prices, which it fears will lead through into factory gate increases, China warned speculators last month over “excessive speculation.” The warning from China’s National Food and Strategic Reserves Administration hit the iron ore market hard, the Financial Times reports, sending the price 10% lower.

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

China turns to base metals

China aluminum

Grispb/Adobe Stock

This month, Beijing has turned its attention to base metals.

The authorities have hinted they may release metal from their strategic reserves. The move would be an overt attempt to dampen further price rises in what it sees as a speculator-fueled rally. Where applicable, it would provide additional supply for those metals where supplies are genuinely tight.

The country holds strategic reserves in copper built up over decades. During slumps, like after the financial crisis, Beijing has stepped in to support domestic producers.

State secrets

As a strategic reserve, copper stocks are a state secret.

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