Will Persistent Global Shortfall Help Copper Prices Get Rid of Multi-Year Resistance? SMM Reports

SHANGHAI, Sep. 23 (SMM) – Market has been pessimistic over copper market fundamentals since the beginning of this year due to expansions at two large copper mines in Peru, leaving copper prices struggling at lows. However, latest data from the World Bureau of Metal Statistics (WBMS) might cheer market up.  

Global copper market was in a supply deficit of 151,000 tonnes during January-July, compared with a shortage of 197,000 tonnes during January-June, WBMS data showed. This marks three consecutive months of shortfall.    

Global copper ore output rose 5.9% year-on-year to 11.70 million tonnes during January-July, according to WBMS data. Output in Chile dropped 4.9% or 167,000 tonnes, and that in Peru tumbled 47.74% or 428,000 tonnes. 

Global copper consumption also grew, which helped offset growth in output. WBMS data showed copper consumption worldwide rose 6% year-on-year to 13.72 million tonnes during January-July. Copper consumption was up 8.38% in China, up 4.49% in the EU, up 8.03% in India, down 3.7% in Japan, down 0.18% in South Korea, and down 2.79% in the US. 

China contributed 49% to global copper consumption during January-July this year, up from 48% in the same period last year. Copper consumption in China was not as pessimistic as market had expected. Instead, recovering Chinese economy allowed China to consume more copper than other countries.  

Most market players, who were pessimistic due to growing supply, failed to notice the important fact that demand is recovering, SMM understood. As such, copper prices lacked upward momentum this year. Copper prices did not fall sharply, either, though. In fact, bottom of copper prices is gradually moving up. 

SHFE copper has been outperforming LME copper recently due to inventory outflows from China to overseas. SHFE copper is now challenging the high level seen in 2011, the year when copper prices began the downward trend. Should SHFE copper succeed in breaking through the multi-year resistance, more gains are expected on the way, SMM expects. Any upside room will depend on how market dynamics and macro front evolve, though, SMM added.

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