LME copper

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.

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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.

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This morning in metals news, U.S. Steel has offered Stelco a 25% stake in its Minntac operation, LME copper fell to a two-week low and China’s industrial profits plunged 36.7% in the first quarter.

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This morning in metals news, the United States Trade Representative will soon consider whether to extend tariff exclusions granted last year for imports of certain products from China, the GFG Alliance is aiming to consolidate its steel operations and make the new consolidated entity carbon-neutral by 2030, and LME copper prices continue to make gains this month.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

USTR to Consider Tariff Exclusion Extensions

Last December, the USTR granted tariff exclusions on $34 billion worth of imports from China.

With those exclusions set to expire later this year, the USTR will soon initiate a process to consider whether or not to extend them.

“The United States Trade Representative (USTR) will commence on November 1, 2019 a process for considering extending for up to twelve months certain exclusions from additional tariffs on Chinese imports that were granted last December and are set to expire on December 28, 2019,” the USTR said.

“In a Federal Register notice to be published this week, USTR will provide details on the process for submitting comments favoring or opposing specified tariff exclusions. The period for submitting comments will run from November 1, 2019 to November 30, 2019.”

GFG Alliance Eyes Carbon-Neutral Future

The GFG Alliance, which includes Liberty House steel plants around the world, is aiming to consolidate its steel production into a single global company: the Liberty Steel Group.

“A single global company with 18 million tonnes of rolled steel capacity annually is to be launched through a consolidation of GFG Alliance’s steel businesses, with an ambition to lead the industry towards a carbon-neutral future,” Liberty House announced Tuesday.

“The family-owned alliance led by Sanjeev Gupta today announces that Liberty Steel Group, which altogether employs 30,000 people in 10 countries, will be incorporated by the end of this year through a merger of GFG’s upstream and downstream steel manufacturing, mining and distribution businesses around the world.”

The new group will aim to be carbon-neutral by 2030.

“At the heart of the group’s mission will be an ambition to build on GFG’s existing GREENSTEEL strategy to aim for net carbon neutral status by 2030 – placing Liberty Steel Group on a pathway to become the first carbon neutral steel company in the world,” the company said. “This will include exploration of the best use of new technologies such as hydrogen generated from renewable power to produce steel.”

LME Copper Rises

The LME three-month copper price, after approaching MetalMiner’s short-term support price in early October, has since made incremental gains throughout the month.

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As of Monday, the LME three-month price rose to $5,910/mt, marking a 2.91% month-over-month increase, according to MetalMiner IndX data.

Oleg Totskyi/Adobe Stock

This morning in metals news, U.S. imports of steel through the first eight months of the year are down 13.6%, Rio Tinto signed a memorandum of understanding (MOU) with China’s largest steel producer and LME copper prices fell Thursday.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Steel Imports Down 14%

U.S. imports of steel for the year through August are down 14% compared with the same period last year, the American Iron and Steel Institute (AISI) reported.

Imports through the first eight months of the year totaled 20.67 million tons. Finished steel import market share for August checked in at 19%, just below the 20% mark for the year to date.

Rio Signs MOU with Baowu

Rio Tinto has signed an MOU with China Baowu Steel Group and Tsinghua University through which the parties will partner to “develop and implement new methods” to reduce carbon emissions across the steel value chain.

“This pioneering partnership across the steel value chain will bring together solutions to help address the steel industry’s carbon footprint and improve its environmental performance,” Rio Tinto CEO J-S Jacques said.

“The materials we produce have an important role to play in the transition to a low carbon future and we are committed to partnering with our customers and others to find the most sustainable ways to produce, process and market them. We are already doing this in aluminium and now, through this partnership, we will be doing it in the steel industry.”

LME Copper Falls

The LME copper three-month price bounced back from MetalMiner’s short-term support level earlier this month, rising 1.13% over the last month, according to MetalMiner IndX data.

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However, the price dropped Thursday, falling 0.7% to $5,750/mt.

As noted earlier this week, global copper mine production dropped 1.4% in the first half of the year, while refined copper production fell 1%, according to the International Copper Study Group.

Aaron Kohr/Adobe Stock

This morning in metals news, the Federal Reserve is expected today to cut interest rates once again, the LME copper price dropped ahead of the Fed’s decision and Steel Authority of India Ltd. (SAIL) shares rose Tuesday.

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Federal Reserve Expected to Make Interest Rate Cut

The Federal Reserve is expected to cut interest rates again later today, CNBC reported.

If the cut comes to fruition, it would mark just the second interest rate cut since the Great Recession.

London Copper Falls

Ahead of the Fed’s decision today, copper on the LME dropped, Reuters reported.

LME three-month copper slipped 0.1% to $5,816.50 per ton, Reuters reported, while the most-traded SHFE copper contract dropped 0.2% to 47,310 yuan per ton ($6,673.63 per ton).

SAIL Shares Rise

Shares of Steel Authority of India Ltd. (SAIL) rose on Tuesday to a four-month intraday high, Bloomberg reported.

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The rise came on the heels of the Indian government’s decision to allow the state-run producer to sell 70 million tons of iron ore from its captive mines, according to Bloomberg.

U.S.-Mexico border wall in Arizona.

A section of an existing US-Mexico metal border wall in Arizona. Source: Adobe Stock/Yukon Charlie.

This morning in metals news, President Donald Trump threatened to close the southern border with Mexico, U.S. Steel was fined over $700,000 for air pollution violations and the LME copper price fell Tuesday.

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Trump Threatens to Close Mexico Border

President Trump intensified his stance on the situation at the border with Mexico, tweeting Monday that “Our detention areas are maxed out & we will take no more illegals. Next step is to close the Border!”

It remains to be seen if he will act on those words; however, such a closure would have wide-ranging ramifications, impacting both the humanitarian crisis at the border and, from a business perspective, throwing a wrench into supply chains.

Trump’s threat also comes at a time when the U.S., Canada and Mexico are in a holding pattern over approval of the United States-Mexico-Canada Agreement (meant as the successor to NAFTA). The executives of the three countries signed the deal during the G20 Summit in Buenos Aires late last year, but the trade deal must be ratified by each country’s legislature.

U.S. Steel Fined Over Emissions

U.S. Steel was hit with a fine of over $700,000 over emissions at its Clairton Coke Works facility in Pennsylvania, the Pittsburgh Post-Gazette reported.

According to the report, the company was fined $707,568 over air pollution violations at the facility during the second half of 2018, elevating the total fines levied against U.S. Steel over the last year to more than $2.3 million.

Dollar Rises, LME Copper Falls

The LME copper price dipped as the U.S. dollar gained strength, Reuters reported.

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In addition, supply concerns stemming from a protest at the Las Bambas copper mine in Peru eased upon the government’s offer of a deal to end the protestors’ blockade, according to the report.

freshidea/Adobe Stock

This morning in metals news, U.S. Treasury Secretary Steven Mnuchin tweeted Friday that this week’s round of trade talks with China were “constructive,” LME copper is on its way for its first quarterly gain since the end of 2017 and China’s imports of copper are forecast to dip this year.

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U.S.-China Talks Continue

Markets reacted positively late this week on optimism from the latest round of U.S.-China trade talks, this time held in Beijing over Thursday and Friday.

U.S. Treasury Secretary Steven Mnuchin tweeted that the talks were constructive.

As Mnuchin noted, trade talks are scheduled to continue next week in Washington, D.C.

Copper Makes Gains

According to Reuters, LME copper is set to notch its first quarterly gain since the end of 2017.

Copper stockpiles in LME-registered warehouses are moving toward 11-year lows, according to the report.

China Copper Imports

Speaking of copper, China is expected to import far less of the metal in 2019, according to a Reuters report citing research house Antaike.

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According to the report, China’s copper imports are forecast to fall 14.7% on account of increased domestic production.

Charles/Adobe Stock

This morning in metals news, the copper price fell Tuesday, U.S. steel mills have produced at a capacity rate of 80.7% through Feb. 16 and a $1.8 billion steel mill could be coming to Texas.

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Copper Falls

With renewed U.S.-China trade talks scheduled today, the price of copper dropped, Reuters reported.

LME copper fell 0.6% to $6,245 per ton, according to the report.

Capacity Utilization Rate

U.S. steel mills posted a capacity utilization rate of 80.7% for the year through Feb. 16, according to the American Iron and Steel Institute’s weekly steel production report.

Adjusted year-to-date production through Feb. 16 hit 12.7 million net tons, up 8.4% from the 11.8 million net tons during the same period last year at a capability utilization rate of 75.7%.

Steel Dynamics Plant Search

San Patricio County in south Texas is in the mix for a new $1.8 billion steel plant in the works from Steel Dynamics, according to the Corpus Christi Caller Times.

In November, Steel Dynamics announced plans to build a new organic flat roll steel mill with an annual capacity of 3.0 million tons. The mill was expected to create about 600 jobs, according to the steelmaker.

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“The company currently expects to locate the facility in the southwestern United States, to cost effectively serve not only the southern United States, but also the underserved Mexican flat roll steel market,” the company said in a release. “Determination of the final site location is subject to state and local government infrastructure and incentive support. Upon final site selection and the receipt of required environmental and operating permits, the company would expect to begin construction in 2020, followed by the commencement of operations in the second half of 2021.”

Charles/Adobe Stock

This morning in metals news, copper gains momentum, Japan’s steel federation thinks domestic output will grow this year and U.S. Steel will have to pay at least $40 million to repair one of its facilities after a fire.

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Copper Reaches Seven-Week High

Copper prices surged to a seven-week high on Thursday, Reuters reported, inversely with a dropping U.S. dollar.

LME copper jumped 0.5% to hit $6,167 per ton, according to the report.

Japanese Domestic Output

The chief of Japan’s steel federation said Japan’s domestic steel output will likely be higher, aided by demand from the 2020 Tokyo Olympics, according to a Reuters report.

In 2018, Japan’s steel output slipped 0.3% on a year-over-year basis, as India overtook it for the No. 2 spot on the list of the world’s top steel producers.

U.S. Steel to Repair Clairton Plant After Fire

U.S. Steel announced this week that it would need to spend at least $40 million on repairs after a fire at its Clairton Coke Plant (just south of Pittsburgh), the Pittsburgh Post-Gazette reported.

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The fire ran through the building on Christmas Eve, leading to county officials to issue air quality alerts.

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.

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