Tighter supply to fuel copper rally in long run

SHANGHAI, Jul 31 (SMM) – Copper prices are expected to rally in the long run, in anticipation of a renewed era of monetary easing and tighter supply.

In the short term, however, fundamentals are unlikely to bolster copper, in view of a smelting capacity spike in China in the second half of the year and anemic downstream demand.

Despite tightness on the mine side, copper prices struggled to soar this year, as the protracted trade war between the US and China, slowing economic growth in China and a downturn across the global took a toll.

Treatment charges for copper concentrate, meanwhile, continued to trend downwards, pointing to tightening supply from mines. SMM assessments showed that TCs for spot copper concentrate stood at $55/mt as of July 26.

While smelters remained frustrated by lower TCs and prices of sulphuric acid, production of copper cathode across China will rise from earlier this year in the short term, as output recovers from concentrated maintenance at smelters in April-May. Smelters remained cautious about suspension as it will bring more significant impact.

SMM data, however, showed that China’s production of copper cathode in 2019 grew slower on a yearly basis, indicating that mine tightness is spreading to the refined metal side.

The sign that supplies of the refined metal are also tightening can also be reflected by faster declines in China’s net imports of copper cathode and lower inventories across the Shanghai Futures Exchange-approved warehouses compared to previous three years.