Monsters of Rock: Doc Copper’s dip short lived on Chinese thirst

Copper cathode premiums at year high of US$60-75/t
Red metal to remain buoyant around US$9000/t despite
Gold up, iron ore down, and round and round we go

Benchmark Mineral Intelligence says evidence of a pick-up in China’s copper demand has been mounting recently and that dips below US$9000/t will be short-lived as macro machinations for red metal see price levels remain strong.

“SHFE copper inventories plunged by 26kt last week – the ninth consecutive week of drawdown to the lowest level since March. Meanwhile, CIF Shanghai imported copper cathode premiums shot up to the highest level this year of US$60-76/t according to Mysteel,” BMI wrote in a note today.

“While the outright drop in copper prices incentivised some opportunistic restocking, the increase was also bolstered by a third consecutive month of pick-up in utilisation rates at cathode-fed semis plants, offsetting growing scrap supply tightness, which has caused many secondary wire rod producers to cut production.

“Adding to the sense of demand optimism was preliminary data from the China Passenger Car Association (CPCA), which showed that China’s August NEV sales breached the 1 million mark for the first time in history, increasing by 17% MoM and 43% YoY, and reaching an overall penetration rate of 54%.”

BMI says that given the gradual demand improvement in China, the analyst feels that any significant dips in prices below US$9000/t will likely be short-lived.

“Meanwhile, any upside will be capped by uncertainty posed by the upcoming US election. Overall, we expect prices to continue to oscillate around the US$9000/t level.”

Market Gainers

Coronado Global Resources (ASX:CRN) (coal) +3.43%

West African Resources (ASX:WAF) (gold) +4.2%

Resolute Mining (ASX:RSG) (gold) +2.34%

Eating Losses

Fortescue (ASX:FMG) (iron ore) -1.98%

Pilbara Minerals (ASX:PLS) (lithium) -2.07%

Champion Iron (ASX:CIA) (iron ore) -2.39%

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