Key Macroeconomic Indicators for Base Metal Prices (2017-5-23)

SMM Morning Meeting Summary: Overnight LME copper opened at $14,208/mt, touched a high of $14,218/mt in early fluctuations, then drifted lower all the way to $14,142/mt near the end of the session, and finally closed at $14,153/mt, up 0.23%. Trading volume was 15,700 lots, and open interest stood at 261,000 lots, an increase of 2,675 lots from the previous trading day, indicating an increase in bearish positions. Overnight, the most-traded SHFE copper 2609 contract opened at 108,200 yuan/mt, with the price center moving up to touch 108,320 yuan/mt in early trading, then drifting lower to a low of 107,900 yuan/mt, before closing at 108,000 yuan/mt, up 0.04%. Trading volume reached 21,000 lots, and open interest was 213,000 lots, a decrease of 1,714 lots from the previous trading day, indicating a decrease in bearish positions.

According to foreign media reports, Chile's government will allow state-owned copper producer Codelco to reinvest 100% of its 2025 profit, totaling approximately $2.42 billion, marking the first time the company has been permitted to retain all of its annual earnings since its establishment in 1976. The decision provides additional financial capacity for Codelco as it works to stabilise copper production while undertaking several capital-intensive projects aimed at extending the operating lives of its ageing mines. The company has accumulated more than $20 billion in debt, increasing pressure on its balance sheet as investment requirements remain elevated. In recent years, Codelco had typically been permitted to retain around 30% of its profits, with the majority transferred to the Chilean government. The financial support comes amid persistent weakness in Codelco's copper production. Following an internal review, the company revised its 2025 output to 1.308 million tonnes, almost 27,000 tonnes below its previous estimate. The revised figure represents Codelco's lowest annual production in nearly three decades and is approximately 19% below its 2021 output. Codelco's new leadership has indicated that improving profitability and project execution will take priority over pursuing aggressive production targets. The retained earnings are expected to provide greater flexibility to finance the company's investment programme internally, potentially reducing its reliance on additional borrowing while it works to improve operational performance. From a copper-market perspective, Codelco's ability to stabilise and eventually recover production remains significant given that the company accounts for around 5% of global copper supply. Allowing the miner to retain its entire 2025 profit strengthens its capacity to fund mine-renewal projects, but the impact on future copper supply will ultimately depend on whether the additional capital translates into improved project execution and a sustained recovery in production.