The
London Metal Exchange copper price has been on a tear over the past few weeks,
spurred by China coming out of pandemic-induced lockdown and swathes of
stimulus from global central banks, chiefly the US Federal Reserve and People’s
Bank of China.
Copper
had been hammered down towards $4,300/mt in March, as stock markets went into free-fall
as the pandemic took hold.
Since
then, global equities have been soaring, primarily because of unprecedented
fiscal stimulus. Many now argue that stock markets are overvalued, with a deep
correction probable as real-world economic signals paint a far more bearish
outlook.
Still,
for the time being, at least, all bets were firmly on. LME three-month copper
was spot bid around $5,700/mt as of 1330 GMT.
China’s
May imports of unwrought copper and copper products rose 21.1% year on year,
but fell 5.5% from April to 436,031 mt, S&P Global Platts calculated based
on data released by the General Administration of Customs on June 7.
However,
due to recent national lockdowns in copper-producing hubs Chile and Peru, they
added, China’s imports of copper concentrate at 1.69 million mt were “well
below both the month-on-month and year-on-year figures (17% and 8%,
respectively).”
Shanghai
Futures Exchange copper prices hit a three-month high June 5, but the support
is not expected to last, with demand lagging the rise in supply and tensions
continuing between the US and China, market sources said.
This
was echoed by the China Nonferrous Metals Industry Association, which said
Chinese copper prices might come under downward pressure as the recovery in
consumption would likely lag that of supply in the domestic market, as demand
outside of China remains lukewarm.
Meanwhile,
tensions between the US and China will also weigh on copper prices, the
association said.
Platts
assessed Chinese copper import premiums at $75-$88/mt plus London Metal
Exchange cash, C&F China, on June 3 for LME-registered brands of a cathode,
down $4 from a week earlier.
Copper rally ‘crazy’:
“The
turnaround in the copper price is nothing short of crazy,” a senior trader
said. “Yes, sure, you’ll get the bulls shouting about electric-vehicle
demand, but come on, we’re not in the future just yet. I know, it’s coming, but
so is Christmas, in December, and I haven’t bought presents for that yet,”
he said.
On
the subject of EV demand, broker Liberum said that it remains optimistic that
copper can continue to slowly recover…” aided by fiscal stimulus,
targeting renewable energy and electric vehicles, towards the back end of the
year.”
In
a recent interview with Platts, American Pacific President Eric Saderholm said:
“There is [a] push for electric vehicles. Electric cars are going to
require around four or five times more copper per vehicle compared with a
combustion engine vehicle, so there is going to be a huge amount of demand for
that as well. Alternative energies are always very copper intensive.”
The
trader added: “In seriousness, though, much like the stock markets
optimism and free money, which in reality is just debt, is fueling utter
madness on the markets. I think people forget we are in a recession, and that
there is a lot of hurt being pushed down the road by central governments.”
At
the start of April, net speculative short positioning was 24% of open interest,
the highest since August 2018. That year the net speculative short position
peaked at 30%, according to the broker.
Thomas
Rutland, a copper analyst at S&P Global MI, said: “We expect that mine
closures [caused by lockdowns] and the resumption, albeit gradual, of economic
activity in China will mean that total exchange copper stocks will not
increase. We assess that the mine closures and the restarting of economic activity
in China to be the reason why copper prices have been held up and are starting
to slowly increase again.”
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