SMM Price Outlook for Base Metals on SHFE (May 5, 2017)

Southern Copper's Tía María copper project in Peru's Arequipa region is planned to begin copper mining in early 2028, adding new output and local employment. The US$1.1 billion project has seen US$693 million invested to date, with a further US$1.25 billion senior note issue funding remaining works. Designed for about 120,000 tonnes of copper a year at a cash cost near US$1.16 per pound, the mine has renewed its water licence and kept desalination procurement on schedule. Southern Copper expects Tía María to ramp through 2028 and lift group copper output beyond 1.06 million tonnes in 2029. While financing and construction are controlled, community licensing and execution risk in Peru remain the key variables to watch.

[SMM Shanghai Spot Copper] Looking ahead to tomorrow, available supply in the Shanghai region is expected to remain tight. Although some imported copper has been arriving gradually during the day, the actual replenishment volume is relatively limited, and the downward pressure on spot premiums is still fairly constrained in the short term. However, as spot premiums stay high, downstream processing enterprises' acceptance of current prices continues to decline, wait-and-see sentiment in the market has strengthened somewhat, and procurement is gradually shifting toward essential demand. At the same time, with premiums at elevated levels, suppliers' willingness to sell has increased compared with earlier, and some supply previously registered as warrants has begun to flow into the spot market, though the overall released volume remains limited. On balance, tight supply still provides some support for premiums, but negative feedback from the demand side on high premiums is gradually emerging, and Shanghai spot copper premiums are expected to pull back somewhat tomorrow.