LME Week: Macro to drive copper prices in short term

LONDON, Oct 8 (SMM) – Copper is likely to be "finely balanced near term", and while macro factors will more likely remain the driver of prices in the short term, said SMM general manager Ian Roper.

Speaking to delegates at LME week in London on Monday October 8, he said that copper inventory has been drawing significantly as low prices encouraged end users to restock. 

Copper inventory decreased by 250,000 mt since July, among which SHFE inventory fell 147,600 mt, and bonded warehouse stock dropped 102,500 mt as the SHFE/LME ratio remained high, he explained. Imported copper saw significant profits, which pushed Yangshan copper premiums higher.

Low copper prices attracted purchasing interest across processing enterprises, and shifted the consumption of copper scrap to cathode, Roper added. 

On scrap, a potential Chinese ban on all scrap imports in 2020 could be extremely disruptive to the global copper market, but policies remain unclear. He explained that China's copper scrap market has adjusted to the Category Seven import restrictions. 

Imports of copper scrap shrank from November 2017 as Chinese authorities tightened quotas for Category Seven imports. Customs data also  showed that scrap import in August 2018 decreased 27.4% from a year ago. 

However, the increase of Category Six copper scrap quotas raised the copper content of imports, and lowered the extent of decline of scrap availability. From current quotas for Category Seven so far, imports under this category could be reduced by more than half. 

Roper also noted that some 900,000 mt of domestic smelter additions were completed, reflecting weakness in concentrate treatment charges (TCs). He added that the concentrate market eased as expectations of disrupted supply improved and and spot material was diverted from India. 

He forecasted that China’s copper output will rise by 10% in 2018, and domestic copper consumption will increase by 3.6% this year.