Copper heads for best quarter since 2010 as supply worries mount
Copper is poised for its best quarter since 2010, helped by optimism over a stronger-than-expected demand rebound in top consumer China and mounting supply concerns in South America.
The metal used in everything from automobiles to electronics has surged 21% this quarter, and climbed above $6 000 a metric ton last week for the first time since the Covid-19 outbreak became a global pandemic.
Prices have rallied steadily over the past three months, fueled by sentiment over consumption prospects as first China and then other large economies began to ease lockdowns. While a new wave of infections adds risk to the demand outlook, the market is getting support from global economic stimulus and concern over mine shutdowns. A report Friday showed hedge funds cut bearish bets on U.S. copper futures and options to the lowest since 2018.
“The basis of the copper rally was three-legged,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets. “The Chinese economic recovery, despite clear warning signs, has surprised strongly versus market expectations; Covid-related supply disruption has been growing rapidly; and traders were fairly short copper and were forced to grudgingly cover throughout the quarter and are now finally small long.”
The metal for three-month delivery rose 0.1% to $5961.50 a ton as of 4:14 p.m. on the London Metal Exchange, heading for its highest closing price in five months.
There’s growing risk to mining in top producer Chile given the continued spread of the virus there, Morgan Stanley analysts including Susan Bates said in a June 29 note. The bank estimates global mine-supply losses of 560 000 metric tons this year -- most of that due to Covid-19 -- and sees demand outstripping production amid mined- and scrap-supply disruptions.
The rebound in prices has been a boon to miners. The BI Global Copper Competitive Peers index of 30 companies is set for its best quarter since the data series started in 2005. Freeport-McMoRan, Hindustan Copper and Hudbay Minerals are all up more than 40% since the end of March.
Copper has also benefited from “improved risk appetite amid global monetary and fiscal stimulus, and short covering given investors were pretty heavily short heading into the second quarter,” said Ryan McKay, a TD Securities analyst.
Comments
The
content
you are trying to access is only available to subscribers.
If you are already a subscriber, you can Login Here.
If you are not a subscriber, you can subscribe now, by selecting one of the below options.
For more information or assistance, please contact us at subscriptions@creamermedia.co.za.
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation