Source: Gelonghui
The copper market supply and demand pattern is still expected to tighten
Recently, the industrial metals market has set off a crazy wave of price increases. In particular, the price of copper, known as “Dr. Copper,” has been making great strides, reaching a new high of nearly two years.
London copper prices surpass 10,000 US dollars per ton
On Friday, LME copper futures rose 1.5% to $10021.50 per ton, the highest level since April 2022. The benchmark price has risen 17% this year. All metals were higher on the London Metal Exchange on Friday.
Shanghai Copper is also opening high today. Shanghai Copper's main contract broke through the 80,000 yuan/ton mark, a new high since 2006. The main monthly contract of 2406 closed at 81,100 yuan/ton today, up 1,780 yuan, or 2.24%.
Analysts pointed out that the relationship between supply and demand is one of the key factors affecting the trend of copper prices. Currently, the supply side is experiencing multiple disruptions. In April, the copper production of the Chilean National Copper Company (Codelco), the world's largest copper supplier, declined. This was mainly due to a mine accident in March, which suspended most of its mining activities at its Radomiro Tomic mine, which caused production to drop to its lowest point in 20 years. The mine is expected to gradually return to normal operation in early May.
Furthermore, geopolitical factors are also affecting copper prices. According to the official website of the British government, on April 12, the US Treasury coordinated with the United Kingdom and issued two new bans prohibiting metal exchanges such as the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME) from accepting newly produced aluminum, copper, and nickel from Russia. These measures are aimed at preventing Russia from deriving revenue from exports of aluminum, copper, and nickel.
Goldman Sachs Sings Too: See you for $12,000 in the first quarter of next year
Mitsubishi UFJ Financial Group analysts said in a report that although the US and UK government's recent move to ban developed market metal exchanges from accepting new Russian aluminum, copper, and nickel is unlikely to immediately affect the balance between supply and demand in the market, the already tight fundamental background of copper and aluminum indicates that the market's attitude towards basic metals will still be bullish.
The rise in copper prices has also boosted the confidence of bulls such as BlackRock and Trafigura. They say copper prices must continue to rise in order to encourage the development of new mines.
Over the next few years, as large mines become more difficult to find and more expensive to build or expand, electric vehicles, renewable energy, and massively expanded power grids will require millions of tons of new supplies over the next few years. BHP Group (BHP Group)'s large-scale acquisition of Anglo-American Resources Group this week highlighted that many miners would rather buy a competitor than launch a new project.
Colin Hamilton (Colin Hamilton), managing director of commodity research at BMO Capital Markets, said in a telephone interview in London: “The cost of building materials is just too high. Everyone expected that the supply pipeline should have reacted to the price increase by now, but that wasn't the case.”
Olivia Markham (Olivia Markham), co-manager of BlackRock World Mining Fund, said in an interview earlier this week that copper would need to reach $12,000 per ton to stimulate large-scale investment in new mines.
Goldman Sachs strategist Nicholas Snowdon said at the CRU World Copper Conference that copper prices are expected to soar to around 12,000 US dollars per ton in the first quarter of next year due to the shortage of ore affecting the refined copper market. Snowdon predicts that in the next three to five years, copper will become the foothills of Mount Everest, and there will be a very serious gap in the supply of refined copper.
Zhan Dapeng, director of non-ferrous research at Everbright Futures, said that judging from the market, LME copper's desire to rise is more active than domestic, while domestic Shanghai copper passively follows, so import losses have increased and the export window has opened. This also shows that overseas markets are more optimistic about this round of copper price increases, and the focus of the long and short game is still overseas.