A Glimpse into the Copper Market in 2022

SHANGHAI, Jan 6 (SMM) - The stimulus policies fuel the bull market. The recent prosperity will end with the peak of US economic growth as well as the first interest rate hike of the Fed. While the economic growth in various countries has been lacklustre with insufficient endogenous forces. The current macroeconomy can hardly push up the commodity prices significantly. The overall prices are expected to stand lower throughout 2022. However, the Fed’s constant expectation management has raised the overall risk appetite of the market, which may slow down the decline in copper prices this year.

The global supply and demand of copper cathode is expected to be in tight balance in 2022. However, the overall supply of copper concentrate will ease. The expansion of Grasberg in Indonesia, Kamoa-Kakula in DR Congo, and other mines will increase the copper concentrate supply by more than 1.1 million mt in metal content. At the same time, the disruption rate will remain low in 2022 amid strong willingness of mines to produce based on the costs of $5,200-5,400/mt driven by high copper prices. Besides, there will be relatively fewer copper refining projects to be put into production in 2022, and the several domestic projects will be put into production intensively in H2. As such, the TCs for copper concentrate spots are likely to rise above $70/mt. However, the biggest disturbance to the supply side will be the impeded global shipping supply chain due to the pandemic. While a large number of containers are stranded on the West Coast of the US, about 100,000-200,000 mt of blister copper and copper cathode are stranded at African ports, causing the global copper stocks to hit historical lows. Amid the tight balance of overall supply and demand this year, the low inventory will support the copper prices. Despite the policy interference from Malaysia and Europe, the resumption of the recycling and dismantling system following the easing overseas pandemic will increase the overall supply of copper scrap, which will intensify the volatility of copper prices this year.

The recovery of global supply under the impact of pandemic will be the focus of the market in 2022. The large number of invisible inventories of copper concentrate, copper cathode, and consumer products stranded at ports may gradually flow into the market and weigh on the copper prices in the second half of the year. At the same, all major economies in the world except for China will tighten the monetary policies, which may also suppress the copper prices. LME copper is expected to trade between $8,200-9,850/mt in 2022, and SHFE copper between 61,000-72,500 yuan/mt.