Copper — a crucial metal used in the industrial, electrical and transportation sectors — staged a ‘supercharged recovery’ in the first half of 2020, according to UK-based metals research consultancy firm Roskill.
Tumbling from market high of $US6,300/t on January 16, copper prices on the London Metal Exchange touched a low point of $US4,618/t on March 23, but have since rebounded strongly.
The LME closing price Monday for copper was $US6,545/t — up 41 per cent from the March low:
Notwithstanding the fact that we need more copper discoveries — right now — to meet future demand, Roskill believes prices are poised to move even higher due to near-term supply issues. Inventories of the metal at warehouses are dropping steeply.
“While speculation may have contributed to the resurgence in prices, there is no doubt that the physical availability of refined metal has tightened appreciably,” said Roskill.
Total metal exchange inventories for copper dipped to 389,000t at the end of June from 616,000t at March-end.
As a result, the premiums buyers pay to take delivery of the metal have soared to around $US100/t.
Copper’s ‘perfect storm’
A lack of scrap or secondary copper, which accounts for 35 per cent of the global market, has also contributed to supply issues in the market.
“The scrap market has been hit hard so far in 2020 by a ‘perfect storm’ of lower prices, personnel operating restrictions, transport problems, and the strict imposition of Chinese quotas on the volume and quality of its imports,” said Roskill.
Taken together these market factors have led to a 25-30 per cent collapse in year-on-year trade flows in the secondary market, and equivalent to a 500,000t supply shortage, it said.
News that China has postponed a new import regime for scrap copper for six months to the end of 2020 indicates that copper prices will likely remain high through to the end of the year, said Roskill.