This morning in metals news: the copper price fell to its lowest level in a month; US housing starts ticked up 5.8% in December; and China’s industrial profits rose 4.1% in 2020.
Copper price dips to one-month low
After surging in the second half of 2020, the copper price has slumped thus far in 2021.
The LME three-month copper price closed last week at $7,873 per metric ton, its lowest in a month.
The price had reached as high as $8,160 per metric ton earlier in January.
As we noted last week, the LME average cash copper price jumped 9.8% from November to December.
However, the copper price has not been the only metal to retrace this past month. Aluminum has also slowed down, closing the month at $1,987 per metric ton after reaching $2,068 per metric ton earlier in the month.
Furthermore, the lead price trended flat in January, while the LME three-month zinc price fell by 6.71%.
Amid the bearish notes from other metals, the tin price played a different tune. The LME three-month tin price closed January up 14.16% month over month, settling at $23,140 per metric ton at the end of last week.
In addition to the global copper market deficit, the ICSG reported global copper mine production fell by 0.5% during the aforementioned period.
Concentrate production did not change compared with the previous year, while solvent extraction-electrowinning fell by 2%.
The COVID-19 pandemic impacted copper mine production last year, particularly in April and May.
In Peru, the world’s second-largest copper producer, copper mine production fell by 14% during the first 10 months of 2019. Furthermore, from April-May, production fell 38% year over year.
However, Peru’s output recovered gradually, eventually coming in up 1.5% year over year in October.
Meanwhile, Chile, the top producer, saw output fall 3% from July-October, leaving output unchanged year over year for the 10-month period.
Mine production also fell in Australia, Mexico and the United States.
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Refined copper production up 1.5%
Meanwhile, refined copper production rose by 1.5% during the 10-month period.
This morning in metals news: the U.S. steel sector’s capacity utilization rate hit 76.7% last week; the London Metal Exchange has proposed permanently closing its iconic Ring trading floor; and the copper price has trended flat over the past week.
Steel capacity utilization reaches 76.7%
The U.S. steel sector’s capacity utilization rate hit 76.7% for the week ending Jan. 16, the American Iron and Steel Institute reported.
Production during the week totaled 1.74 million net tons, up 1.7% from the previous week. The total, however, marked an 8.8% year-over-year decline.
The Copper Monthly Metals Index (MMI) increased 3.3% this month, as copper producers have faced challenges that are impacting supply.
After a slow December, copper prices continued to increase the first week of January. Prices surpassed the $8,000/mt mark.
However, copper prices remain volatile. As the pandemic continues to develop, the U.S. dollar remains around 90, future demand is uncertain and supply is strained.
Supply constraints from copper producers
Major copper producers are experiencing supply constraints.
On Christmas Eve, MMG declared force majeure on its Las Bambas copper mine in Peru as the local community continued to block a nearby road in protest, making it impossible for the company to transport its concentrate to the port to be shipped. The blockage started Dec. 12, but production continued.
Las Bambas represents approximately 2% of global copper production.
Meanwhile, on Jan. 4 the Mongolian Government informed Rio Tinto — through the miner’s partly-owned subsidiary Turquoise HillResources — that if the Oyu Tolgoi underground expansion did not prove to be more profitable, it would terminate their 2015 agreement on fiscal terms.
The expansion would make Oyu Tolgoi the fourth-largest mine in the world by 2030. As such, a shutdown would represent a significant supply disruption.
Large disruptions mean supply constraints, which in the long term support prices even more.
Members of the China Smelters Purchase Team (CSPT) lowered treatment and refining charges to $53 per tonne and 5.3 cents per pound for the first quarter of 2021. These charges represented a 8.6% cut compared to the previous quarter.
Similarly, the annual TC/RC benchmark, set by Chinese smelters and Freeport-McMoRan, declined for the sixth consecutive year. The benchmark settled in at $59.50 a tonne and 5.95 cents per pound.
The TC/RC declines come as no surprise.
Mine supply remains tight (as mentioned above). Furthermore, smelting capacity continues to increase, particularly in China. This mix forced smelters to accept lower charges in order to secure raw material.
TC/RCs are a good indicator of raw material available in the market. When primary material is widely available, TCs go up. Meanwhile, when primary material is scarce, smelters lower their TCs. This can affect market sentiment and, ultimately, the price.
Continuing our rundown of the best of 2020, let’s take a look back at the year that was for copper.
Like other metals, copper suffered an early-year swoon.
The LME three-month copper price fell to just over $4,600 per metric ton in late March, as nations around the world began to battle the early stages of the coronavirus pandemic.
Since then, copper has bounced back, in large part powered by Chinese demand.
Just before Christmas, the price surged to a 2020 high of $7,914 per metric ton. The price marked its highest since Q1 2013.
Meanwhile, as we look ahead, copper is likely to remain in high demand, with growing application from the renewables sector (including wind and solar). As nations around the world continue to advance green initiatives — albeit of varying degrees of ambition — the demand for copper will certainly be there.
“Sustained growth in copper demand is expected to continue as copper is essential to economic activity and even more so to the modern technological society,” the International Copper Study Group said in its copper market forecast for 2020-2021. “Infrastructure development in major countries such as China and India and the global trend towards cleaner energy will continue to support copper demand.”
Furthermore, the ICSG forecast global apparent usage of refined copper will rise by 1.1% in 2021.
So, without further ado, let’s take a look at the most-viewed copper-centric posts of the year on MetalMiner.
Global copper mine production slipped by 1% during the first nine months of 2020. On the other hand, the fall is well below the 3.5% drop recorded during the months of April and May, when the first wave of coronavirus infections hit many parts of the world.
Meanwhile, copper concentrate production fell 0.8%, while solvent extraction-electrowinning dropped by 1.5%.
No. 2 copper producer Peru saw its output fall 16.5% during the first nine months of the year. Although the reduction dropped to 2% in July, ICSG noted, Peru’s copper mine production in August and September fell 12.5% year over year.
Top copper producer Chile, meanwhile, saw its copper production rise in the first half of the year by 2.5%.
Like Peru, however, Chile’s production slipped in Q3. Chile’s Q3 copper mine production fell by 3.7%, the ICSG reported.
This morning in metals news: Rio Tinto has committed $10 million toward its research partnership with China’s Baowu Steel Group; meanwhile, Freeport McMoRan completed the sale of an undeveloped project in the Democratic Republic of the Congo; and, lastly, copper remains at an over seven-year high.
Rio Tinto commits $10M investment toward low-carbon steelmaking research
Miner Rio Tinto has announced a commitment of $10 million toward its low-carbon steelmaking research partnership with Chinese steelmaking giant Baowu Steel Group.
“Rio Tinto’s investment will fund the joint establishment of a Low Carbon Raw Materials Preparation R&D Centre, which will initially prioritise the development of lower carbon ore preparation processes,” Rio Tinto said in a release Wednesday. “This will include creating two ore preparation pilot plants, one to use biomass and the other exploring using microwave technology. The investment will also support work on carbon dioxide utilisation and conversion at the China Baowu Low Carbon Metallurgical Innovation Centre, which is a Baowu-led open platform for advancing metallurgical technologies to support the low-carbon transformation of the steel industry.”
This morning in metals news: ArcelorMittal officially completed the sale of ArcelorMittal USA to Cleveland-Cliffs; the Energy Information Administration (EIA) projects energy-related carbon dioxide emissions to fall this year; and the copper price continues its long-term rise.
ArcelorMittal’s sale of U.S. operations goes through
ArcelorMittal officially completed the sale of ArcelorMittal USA to Cleveland-Cliffs, the steelmaker announced today.
Under the terms of the sale, ArcelorMittal receives $505 million in cash and 78 million shares of Cleveland-Cliffs common stock. In addition, it receives non-voting preferred stock redeemable for approximately 58 million shares of Cleveland-Cliffs common stock (or an equivalent amount in cash).
Energy-related carbon dioxide emissions to drop in 2020
The EIA forecast energy-related carbon dioxide emissions in the U.S. will decline by 11% this year compared with 2019.
I am sure China didn’t intend to launch its new copper contract in the midst of so much speculative activity, but the maelstrom of investor interest in the copper market and the copper bull run at present certainly won’t harm volumes following the contract launch last week.
The Shanghai International Energy Exchange (INE) launched its new contract allowing both domestic and international investors to trade copper in China. Similar to the metals traded on the SHFE, delivery is to take place in China with the contracts denominated in renminbi.
The launch of this contract is intended to boost China’s role in setting copper prices. As such, it will help it become a price maker rather than a price taker, Capital Economics wrote last week.
China both produces and consumes roughly half of all ferrous and non-ferrous metals globally. Thus, it makes sense it should develop a regional market for such products. As we have seen with the arbitrage play in aluminum this year, metals can move to very different dynamics within China relative to the rest of the world.
Strong demand in China has been a big part of the recovery in prices.
China’s increased imports of refined metal this year, driven in part by a significant increase in infrastructure spending, has boosted demand. Meanwhile, certain regions of the world, such as South America, have struggled to maintain output due to lockdowns.
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.
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.