copper price
Norsk Hydro

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This morning in metals news: Norsk Hydro recently resumed production at its Husnes aluminum plant; the Census Bureau recently released the latest data on new housing starts; and copper prices continue to rise.

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Norsk Hydro resumes production at Husnes B-line

Oslo-based Norsk Hydro announced the restarts of production at its Husnes aluminum plant after having operated at half capacity since 2009.

The A-line at Hydro’s Husnes plant produces about 95,000 tonnes of aluminum annually. Hydro added it will ramp up output to around 195,000 tonnes as it restarts 200 electrolysis cells in the one-kilometer-long B line.

Hydro President and CEO Hilde Merete Aasheim said the restarts are based on a “combination of increased demand for aluminum and expectations that Norway will continue to utilize EU’s emissions trading system (ETS) for 2021-2030.”

Strong October for housing starts

In addition to the Norsk Hydro news, U.S. housing starts reached a seasonally adjusted annual rate of 1.53 million in October. The October rate marked a 4.9% increase from September.

Furthermore, the October rate marked a 14.2% increase year over year.

Meanwhile, single-family housing starts in October hit a rate of 1.18 million, up 6.4% from September.

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copper smelter

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Earlier today we touched on aluminum prices — well, the copper price is similarly ascendant.

The copper price has, as we’ve mentioned on multiple occasions, been supported by a recovering Chinese economy.

Furthermore, according to data released Monday by the International Copper Study Group (ICSG), global copper production declined over the first eight months of the year.

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

Copper price rises to 2020 high

The LME three-month copper price closed last week at $7,195 per metric ton, its high for 2020.

In addition, the price point in fact marked its highest since early 2014.

How much further can it go? Certainly, markets at large and metals in particular — including copper — showed upward momentum after recent announcements of potentially effective COVID-19 vaccines from Pfizer and Moderna.

As Maria Rosa Gobitz explained in this month’s Copper Monthly Metals Index (MMI) report, copper prices could continue to go up. In fact, according to investment bank Goldman Sachs, copper could rise to $7,500 per metric ton by this time next year.

While it’s still early to say, with the copper price already approaching the $7,200 mark, $7,500 next year is not out of the question. The LME three-month copper last reached the $7,500 per metric ton mark in spring 2013.

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LNG vessel

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This morning in metals news: miner Anglo American has signed a 10-year contract to add vessels fueled by liquefied natural gas, or LNG, to its fleet; jobless rates fell in 37 states in October; and copper prices retraced slightly.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Anglo American welcomes new vessels fueled by LNG

Earlier this month, miner Anglo American hailed the future addition to its fleet of four new vessels fueled by LNG.

“The new build LNG vessels offer significant environmental benefits, including a c.35% cut in CO2 emissions compared to standard marine fuel, while also using new technology to eliminate the release of unburnt methane, or so-called ‘methane slip,'” the miner said in a release.

Shanghai Waigaoqiao Shipbuilding in China will build the fleet, which is expected to be delivered in 2023.

Jobless rates down in 37 states

Aside from the Anglo American LNG news, jobless rates in October fell in 37 U.S. states, according to the Bureau of Labor Statistics.

Furthermore, the national unemployment rate fell by 1.0 percentage point to 6.9%. However, the rate marked a 3.3-percentage-point increase from the October 2019 rate.

Copper falls slightly

The LME three-month copper price has been on a relentless rise since late March.

After taking somewhat of a breather in September, copper continued its ascent in October and the first half of November.

Copper closed Thursday at $7,046 per metric ton, or up 3.07% month over month. However, the price dipped a little over 1% this week after opening the week at $7,128 per metric ton.

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The Copper Monthly Metals Index (MMI) increased 1.2% this month, as copper prices surged to a 28-month high in October.

November 2020 Copper MMI chart

Copper price gains

Copper prices reached a 28-month high at $6,901.50/mt on Oct. 22. The price has lost support since, potentially due to surging global coronavirus infections and stalled U.S. stimulus negotiations.

Copper is a good indicator of economic growth and concern. However, the copper price reacted mildly to the U.S. election. The LME price moved up 1.2%.

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Future copper demand

Analysts at Goldman Sachs believe that structural underinvestment, policy-driven demand and macro tailwinds from a weakening dollar and rising inflation risk may create a bullish outlook for 2021.

They estimated a Biden win would increase U.S. copper demand by 2% over the next five years. In addition, it predicted copper prices, which fell back to $6,800 on a general metals pullback last week, to be at $7,000 in three months. Furthermore, the investment bank predicts copper to hit $7,250 in six months and $7,500 by this time next year.

Besides the increase of electric vehicle demand, according to the International Energy Agency (EIA) energy investment is shifting away from fossil fuels, with renewables growing 80% by 2030.

Solar and wind energy projects are benefiting from government support and monetary policies. The expansion of transmission and distribution of those forms of renewable energy will require large amounts of copper.

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steel imports

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This morning in metals news: the U.S. has seen rising imports of blooms, billets and slabs; the power sector’s coal consumption dropped significantly in the first half of this year; and copper prices trended sideways this week.

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U.S. imports of blooms, billets and slabs rise

U.S. imports of blooms, billets and slabs surged during the July-September 2020 period compared with the October 2019-June 2020 period, per Steel Imports Monitoring and Analysis (SIMA) system.

Total imports of blooms, billets and slabs jumped 489% to 50,110 tons during the July-September 2020 period.

Meanwhile, imports of blooms, billets and slabs from India jumped 2,954% to 18,333 tons during the July-September 2020 period.

In other SIMA trend data, U.S. imports of steel piling from China jumped 532%. Imports of tin plate from China jumped 448% to 6,152 metric tons.

Coal consumption declines

The U.S. power sector’s coal consumption fell by 30% during the first half of 2020 compared with the first half of 2019, the Energy Information Administration (EIA) reported.

“After setting an annual record of 1,045 MMst in 2007, coal consumption in the electric power sector has been declining,” the EIA said. “This decline is happening as many coal-fired power plants are retiring or are converting to natural gas, driven by tighter air emission standards and the decreased cost-competitiveness of coal relative to other resources.”

Copper trends sideways

As the U.S. awaits the final results of the 2020 presidential election, the copper price has taken a breather.

The copper price closed Wednesday at $6,760 per metric ton after closing last week at $6,706 per metric ton.

However, over a one-month period, the copper price is up 3.69%.

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

copper mine

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Global copper mine production fell 0.8% during the first seven months of 2020, the International Copper Study Group (ICSG) reported.

Furthermore, the global copper market posted an apparent deficit of 255,000 metric tons during the period.

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Copper mine production slips

Although copper mine production has recovered as the year has progressed, output through the first seven months of the year fell 0.8%.

Peru, the world’s second-largest copper producer, saw significant pandemic-related impacts on its copper operations earlier in the year. The country’s copper mine output fell 18% during the first seven months of the year. In the April-May period, Peru’s copper output fell 38% on a year-over-year basis.

However, activity has picked up since then. Peru’s copper mine output fell by only 2.2% year over year in July.

Meanwhile, Peru’s southerly neighbor, Chile — the world’s top copper producer — saw its output rise 1.5% in the first seven months.

Copper mine production down but refined copper output rises 1%

Aside from copper mine production, output on the refined copper side rose by 1% during the first seven months of the year, the ICSG noted.

Chile’s total refined output, for example, jumped 10%. Refined production in the Democratic Republic of the Congo and in Zambia rose by 6% and 9%, respectively.

Copper price gains

It’s no secret that the copper price has been one of the fastest risers among the base metals this year.

Recently, MetalMiner’s Stuart Burns weighed in on the copper price rise and, moreover, its sustainability.

“Is copper’s rise overdone?” Burns asked.

“In reality, no, probably not.

“Lockdowns outside of China have impacted copper demand in the rest of the world. Vaccine or not, the world will have to come to terms with the pandemic; demand will come back.”

The ICSG noted the average LME copper cash price in September marked a 3.3% increase from the previous month. The average price in September stood at $6,712 per metric ton.

Strike averted at Escondida

One factor previously hanging in the balance with the potential to impact copper mine production was the labor situation at the Escondida mine, the world’s largest copper deposit.

With a strike potentially brewing, a work stoppage — as occurred in Q1 2017 and lasted for six weeks — the copper price could have received significant upward support.

However, Reuters reported last week that union supervisors at the mine had struck a deal, thus averting a labor stoppage. The mine is majority-owned by BHP (57.5%).

According to BHP’s latest quarterly production report, copper production from the Escondida mine during the quarter ended Sept. 30 totaled 285 kt. The total marked a decline of 3% from the previous quarter and on a year-over-year basis.

BHP’s guidance for Escondida’s production in fiscal year 2021 is 940-1,030 kt. Output from the mine reached 1.19 million tons in fiscal year 2020, up 4% from the previous year.

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

The copper price breached $7,000 per ton this week, reaching $7,034 per ton on the LME — the highest level since June 2018.

What does this tell us? Is demand robust and supply constrained?

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

China’s recovery boosts copper price

Well, the world’s largest consumer, China, is certainly back to positive GDP growth. Its recovery from the pandemic lockdowns has been rapid and ahead of the rest of the world.  The country’s early application of infrastructure investment aided the recovery, which in turn boosted demand.

Higher refined metal imports support the impression China is on a 2009-2010 type stimulus led ramp-up in demand.

The reality is it will be much more highly nuanced this time, but a good story takes some discounting.

Supply side struggles

On the supply side, the pandemic has disrupted production in major copper-producing countries, like Chile.

Antofagasta advised this week their third-quarter production would be down 4.6%, according to the Financial Times.

The miner is not alone.

BHP, Glencore and Anglo American are also facing the same supply market risks. The whole Chilean market faces the risk of higher taxes and tighter water controls if Chile’s proposed re-writing of the constitution goes through.

An obvious marker driving copper price support is inventory levels. However, MetalMiner research has shown inventory and price have a very poor correlation on anything other than a short-term basis. Copper’s increased refined imports this year have in part gone to the restocking of China’s copper stocks rather than actual demand.

The Financial Times reports China has stockpiled 800,00 tons this year. At the same time, falling LME stocks are cited as evidence of metal shortage. However, what we are really seeing is a repositioning of inventory from outside China to inside China.

Is that demand or just speculative build?

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steel shipment

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This morning in metals news: August 2020 steel shipments by U.S. steel mills fell 22.9% year over year; Norsk Hydro announced the termination of a memorandum of understanding; and, finally, the copper price made mid-week gains.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

August 2020 steel shipments

August 2020 steel shipments from U.S. mills fell by 22.9% on a year-over-year basis, the American Iron and Steel Institute (AISI) reported.

U.S. steel mills shipped 6.5 million net tons in August. The August total, however, marked an 8.2% increase from the previous month.

Furthermore, in the year to date, U.S. steel shipments reached 53.8 million net tons, down 17.0% compared with the first eight months of 2019.

Norsk Hydro terminates MOU

Norsk Hydro recently announced the termination of a memorandum of understanding (MOU) with Golar Power and CELBA.

The MOU included Hydro’s alumina refinery Alunorte, Golar Power Brasil Participações and Centrais Elétricas Barcarena (CELBA), with the ultimate goal of bringing liquified natural gas (LNG) to Hydro’s Alunorte refinery in Brazil.

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The Copper Monthly Metals Index (MMI) decreased 1.2% for this month’s value, even as the copper demand outlook shows signs of strength.

October 2020 Copper MMI chart

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Prices and warehouse stock correlation

Our technical analysis focuses on price movement and volume to scrutinize supply and demand fundamentals.

However, this month MetalMiner carried out a correlation analysis between LME copper prices and LME warehouse stock levels.

The correlation analysis found an 86.06% inverse correlation between LME copper prices and its warehouse stock (at least, for the past year). That means that when prices rise, stock inventories decrease, and vice versa.

In this case, the correlation does not include any lag for either the price or stock inventories.

Copper inventories in LME warehouses decreased slightly to 73,625 metric tons, down for the fourth consecutive month. However, stocks spiked Sept. 28 and closed at 165,600 metric tons. During that time, LME copper prices traded slightly up but mostly sideways for most of the month. The copper price sharply declined Sept. 23.

Ultimately, the copper price dropped below the $6,600/mt mark. Another important event was the large number of deliveries that occurred Sept. 28.

This shows there is a strong relationship in the copper market between prices and stock inventory. As prices continued to go up, regular copper deliveries occurred from LME warehouses and stocks declined. As the price dropped, some buyers took advantage of the lower prices to cover their demand. However, that window closed in five days and followed the rapid increase in stocks.

The data suggest that, in the case of the copper market, prices and warehouse stocks follow the market’s demand. However, MetalMiner will continue to carry out another correlation analysis for a wider time frame to confirm that the correlation holds over time.

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steel imports

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This morning in metals news: U.S. steel imports plunged by more than half from July to August; copper price gains Monday were capped over concerns regarding long-term prospects; and the WTI crude oil price slipped.

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U.S. steel imports fall to 1.2M metric tons

U.S. steel imports fell to 1.2 million metric tons in August, down from 2.5 million metric tons in July, the U.S. Census Bureau reported.

Through the first seven months of the year, the U.S. imported 13.7 million metric tons of steel. The import total marked a decline from the 17 million tons imported during the same period in 2019.

Copper gains capped

Meanwhile, in addition to U.S. steel imports, the copper price posted gains Monday but its rise is capped, according to a report by Reuters.

The LME copper price rose 0.6% on Monday, up to $6,584.50 per metric ton.

Concerns over copper’s long-term prospects capped gains, according to the report.

WTI crude falls

As readers of the MetalMiner Annual Outlook know, oil prices are a key factor in our metals price analysis.

The WTI crude oil price closed Friday at $40.25 per barrel, down $0.86 per barrel from the previous week. On a year-over-year basis, Friday’s closing price fell $16.16 per barrel.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

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