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USD 4,500 is the new normal for copper prices- 2016 China(Guangzhou)Non-Ferrous Metals Exhibition
12/2/2015 non-ferrous metals expo |
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Market Realist reported that Copper prices resumed their downside in November after remaining relatively strong in October. On November 26, the LME (London Metals Exchange) three-month copper contract closed at $4,650 per metric ton, rising more than 2.5% from the previous day’s closing. Nonetheless, so far in November, the LME 3M copper contract has fallen more than 9%
Copper prices have regularly flirted with the $4,500 per metric ton level last month. In the previous correction in copper prices this year, the $5,000 level acted as a crucial support for copper prices. Copper did go below $5,000 per ton in August and then again at the end of September. However, the LME the three-month copper contract closed below $5,000 per ton only thrice in August and twice in September. But then prices bounced back sharply after that.
In the recent leg of copper’s correction, the $5,000 level seems to have lost its relevance. The LME three-month copper contract has now closed below $5,000 per ton for 15 consecutive trading sessions.
The big question is what’s driving copper prices lower? One thing, of course, is the negative global sentiment around base metals. LME trading is dominated by financial market participants who seem to be getting bearish over commodities. But then, market sentiments are based on available indicators and other data points. In the next parts of this series, we’ll explore the key factors that are driving down copper prices.
Chinese copper demand has been the key driver of copper prices for more than a decade now. China’s slowdown has been the major factor driving copper prices to levels unseen since the global financial crisis of 2008–2009. Several analysts were expecting a recovery in Chinese (MCHI) copper demand in 2H15. But forget about a recovery. Chinese copper demand seems to be getting worse.
According to the ICSG (International Copper Study Group), China’s apparent copper demand is expected to be flat this year. In its report, the ICSG says that other agencies expect “real” Chinese copper demand to rise 3%-4% this year. The ICSG also adds these demand forecasts have been revised downwards from April when real Chinese copper demand was expected to rise 4.5%–5% in 2015. Please note that apparent demand is real demand plus any change in inventories. Real demand tends to be higher than apparent demand when there’s inventory destocking.
While China is the largest copper consumer, it’s not self-sufficient in its production of the metal. China needs to import raw copper for its smelters and refining plants. China imports copper ore and scrap and processes it into refined copper. However, China is the largest refined copper producer in the world, accounting for over a third of global refined copper production. Chile (ECH) is the second-largest producer at the refinery level, and Japan is the third-largest producer. Investors closely follow China’s copper production and refined copper imports to get a sense of the country’s copper market.
China’s refined copper production fell by more than 5% year-over-year in October. However, on a year-to-date basis, Chinese copper production has risen by 4% or only about 250,000 metric tons. China’s refined copper imports have fell by 57,000 metric tons in the first ten months of the year compared to the corresponding period last year.
Since China isn’t a big copper exporter, its domestic production and refined copper imports act as a proxy for the country’s domestic consumption. The slowdown in China’s copper production and refined copper imports paints a grim picture of the country’s copper demand.
有色金属展-2016年第十七届广州国际有色金属展览会-巨浪展览 non-ferrous
metals- 2016 China(Guangzhou)Non-Ferrous Metals Exhibition
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