The Zhitong Finance App learned that according to the Commodity Market Analysis System, copper prices dropped sharply last week. As of the weekend, the spot price of copper was 83,275 yuan/ton, down 4.42% from 87121.67 yuan/ton at the beginning of the week. The increase in global copper deposits in 2024 will be significantly lower than in 2023, and the annual increase in copper ore is expected to be only about 300,000 tons. Despite some contraction on the copper ore supply side, the supply of refined copper in China is currently relatively abundant. High inventories are putting pressure on the rise in copper prices. Downstream demand is improving overall. It is expected that the copper market may fluctuate at a high level in the short term.
Price trends
According to the Commodity Market Analysis System, copper prices fell sharply last week. As of the weekend, the price of spot copper was 83,275 yuan/ton, down 4.42% from 87121.67 yuan/ton at the beginning of the week.
Weekly rise and fall of copper
According to the weekly K-bar chart of the Business News Agency, in the past three months, copper prices have fallen by 5 and 7 per cent each week. Recently, copper prices have dropped sharply.
Macro aspect: The latest minutes of the Federal Reserve's meeting conveyed a hawkish attitude and suggested that the possibility of future interest rate hikes still exists, which led to a strong rebound in the US dollar index. At the same time, the market's expectations for the Fed to cut interest rates have changed. Previously, falling inflation made the market generally expect interest rate cuts to be implemented in September, but now it seems that this expectation has been challenged by the cautious attitude of Federal Reserve officials.
Supply side: The increase in global copper ore in 2024 will be significantly lower than in 2023, and the annual increase in copper ore is expected to be only about 300,000 tons. Copper supply disruptions are mainly due to a decline in Panamanian copper production and a decline in resource production in the United Kingdom and the US. The discontinuation of production at the Panamanian Cobre Panama copper mine, a subsidiary of First Quantum, will clearly impact copper supply from 2023 to 2024. According to Quantum's production guidelines, the mine will continue to stop production in 2024, affecting copper production of about 300,000 tons. British and American resources have drastically lowered production forecasts. The 2024 copper production guidelines from British and American resources, geological problems at its Quellaveco mine in Peru, and maintenance of its processing plant in Los Bronces, Chile, will cause a significant decline in copper production.
However, the supply of refined copper in China is currently relatively abundant. As of last weekend, copper stocks in mainstream regions increased by 12,300 tons from Monday to 4151,000 tons, an increase of 0.47 million tons over the previous week, reaching a new year's high.
LME copper inventory
According to data released by the London Metal Exchange (LME), LME copper inventories have risen slightly recently. As of last weekend, LME copper stocks were 112,675 tons, up 6.4% from the beginning of the week.
In terms of imports: China imported 2.348 million tons of copper ore and concentrate in April, and 9.336 million tons of copper ore and concentrate in January-April, an increase of 6.9% over the previous year. China's imports of unwrought copper and copper in April were 438,000 tons, and imports of unwrought copper and copper in January-April were 1.813,000 tons, an increase of 7.0% over the previous year.
Demand side: In the process of transition between old and new energy sources, major regions and countries around the world continue to implement new energy support policies, and the new energy industry is driving a continuous increase in copper consumption. It is estimated that in 2024, new energy vehicles and photovoltaics will add 255,800 tons of copper and 171,600 tons of copper, respectively, and 85,600 tons of wind power.
In traditional industries, China's economy continues to grow, driving an increase in traditional copper consumption. As favorable real estate policies continue to be released, the real estate market is likely to stabilize. On May 17, the central bank issued three new property market policies in a row to abolish the lower limit of mortgage interest rates, lower interest rates on provident fund loans, and reduce the minimum down payment ratio. The “three arrows go hand in hand” policy in the property market boosts confidence in the real estate market.
Investment in power grids continues to gain strength, and the growth rate of investment continues to expand. The State Grid is expected to achieve the target investment of more than 520 billion yuan in 2023, and investment is still likely to increase in 2024.
In summary: According to the latest information released by the International Copper Research Group (ICSG), global refined copper production reached 2.33 million tons in March 2024. In contrast, consumption was 2.2 million tons, leading to an oversupply of about 125,000 tons, which is down from the 190,000 ton surplus in February. If changes in China's free trade zone inventory are taken into account, the surplus in March was 138,000 tons, while the surplus in February was as high as 221,000 tons. Despite some contraction on the copper ore supply side, the supply of refined copper in China is currently relatively abundant. High inventories are putting pressure on the rise in copper prices. Downstream demand is improving overall. It is expected that the copper market may fluctuate at a high level in the short term.