The Aurubis Copper Mail informs you monthly about current trends on the copper market.

Transcription

1 Copper Mail No. 133 March 2, 2016 The Aurubis Copper Mail informs you monthly about current trends on the copper market. In focus February 2016 was uneventful on the copper market and was impacted by significantly reduced activities due to the New Year s festivities in China. The general news being reported didn t shed any light on new market developments. Copper price increases were limited by the stronger dollar, while the production cuts being implemented were limited by ongoing speculation about weak demand from China. 1

2 Economic situation The Chinese stock market fell significantly, by 6 %, after the end of the New Year s celebrations on February 25. This didn t leave any traces in the European stock markets, however, as they even recorded price increases. The robust consumption climate in Europe and a strong rise in incoming orders for durable goods in the US contributed to this effect. The head of China s central bank announced during the G-20 summit in Shanghai that there was still monetary leeway and monetary instruments to counter the risks of a downturn. According to him, there is no basis for ongoing depreciation of the yuan. After the summit, it was announced that Chinese financial institutes would have to keep less capital as a minimum reserve in order to increase liquidity in the financial system. Copper essentials Not much changed in the fundamental copper market data in February. There were influences from the currency developments of the US dollar and the yuan, among other factors. The Chinese New Year s celebrations are over in the meantime. Officially, the New Year s holiday was from February 7 to 13, but it generally takes a few more days until business returns to normal. This was also evident in daily copper business. There is still a lack of perceptible buying interest for cathodes. There were attractive arbitrage possibilities between the LME and the SHFE on some days during the past few weeks, but these have disappeared. In January, China imported 440,000 t of unwrought copper and copper products and was thus 17 % below the high level of the previous month. On the other hand, 2

3 this volume exceeded the previous year s figure by 7.3 %, which was good in light of the general conditions. Holiday influences affected this as well, which was evident in Chinese foreign trade according to data from the customs authorities. The Chinese National People s Congress will meet starting March 5. Concrete macroeconomic goals and information about the next five-year plan is expected from this meeting. This could also provide some new indications about the development of the copper market. Price trend After the decline in the previous month, the copper price recovered again somewhat in February, though with fluctuations. The second half of the month in particular showed LME prices over US$ 4,600/t (settlement). Copper was valued at US$ 4,705/t on February 29. The spot/forward price structure varied again between minimal contango and backwardation for three-month contracts. 3

4 Copper raw materials On the stock markets, prices of mining shares intermittently moved upward in February. On the other hand, large, well known mining groups had to report strong profit decreases in the past year due to the lower metal prices. The readjustment of investment portfolios and other measures will nevertheless improve the mine operators cost positions and thus enable efficient production with comparably low copper prices. The mine output of copper is described as good by Metal Bulletin, with a good concentrate supply accordingly. While buying interest has risen on the spot market, there can be no talk of a shortage situation. The background of the emerging demand could be the resumption of production at Chinese copper smelters following the holiday break. The disruption at Andina (see Production) will likely have limited effects on supply. The renewal of Freeport McMoRan s export license for 4

5 copper concentrates from Indonesia provides relief for the market as well. The first shipments have been made from the Las Bambas mine production in Peru. With rising copper prices, activities on the European copper scrap market have increased slightly again. However, traders are still currently concentrating first and foremost on settling back orders from existing contracts. Nevertheless, the change in the situation has allowed for individual new contracts with improved refining charges. Production After a forced seven-month production break due to drought, the Ok Tedi mine in Papua New Guinea resumed operation on March 1, The company s 2014 annual report states that the average output for the year was 400,000 t of copper concentrates. According to the national statistics office in Chile, the country produced 454,000 t of copper in January, 13.8 % less than January In the Andina mine owned by the Chilean company Codelco, there was a leak in the transport system for copper concentrates on February 25. Codelco reported a gradual return to normal operations in late February. Inventories The copper inventories at international metal exchanges were in motion in February, but the trend varied. The LME inventories continued to fall, by nearly 44,000 t to 195,625 t, while the volumes stored at the SHFE increased by 64,000 t to 276,023 t. Some of the copper volumes registered for delivery (canceled warrants) were delivered, so there was a reduction from about 73,000 t at the end of January to 43,550 t at the end of February. There was a jump in inventories at the SHFE in the first half of February, i.e. prior to and during the New Year s celebrations. In contrast, there weren t any significant changes in the second half of February. According to CRU, the copper inventories in the Shanghai bonded warehouse supposedly increased to around 375,000 t again in the first half of February. 5

6 Product markets The German automotive industry provided information about its business in China via its association, the VDA. According to the report, the industry expects a sales increase of 6 % to 21.3 million cars in China in If 20 kg of copper is assumed for each car, the copper demand for total sales amounts to 426,000 t. In December the VDA had forecast 2 % growth. An important impetus in this case is still the VAT for the purchase of new cars, which was cut in half for cars with up to 1.6 liter engine displacement. The association also views the sales situation for Western Europe and the US positively. 6