Copper is WoodMac’s favored metal because shareholders aren’t giving a mandate to mining companies to invest in supply.
“Built into the DNA of copper is rising prices over the medium term,” Kettle says.
Source: Bloomberg
Beijing's stimulus package, centred on "new" infrastructure such as electric vehicle charging points, should be positive for copper demand.
China's continued strong imports and relatively flat global exchange stocks reinforce the positive optics.
But, Commerzbank warns, "this optimism is premature in our opinion as we believe that the worst is yet to come."
The International Wrought Copper Council (IWCC) is expecting a surplus of almost one million tonnes of metal this year and next.
Unsurprisingly, given the level of lockdown disruption in key producer countries such as Peru, global mine supply is expected to fall by 4% this year. That will translate into a 2.4% drop in production of refined metal.
However, the COVID-19 supply shock will be exceeded by the hit to demand, the IWCC suggesting global usage could fall by as much as 5.4% in 2020.
Even as it stands, the copper market may be heading for stormy waters, although the price isn't saying so right now.
1. Western Copper Corporation (WRN)
2. Teck Resources, Ltd. (TECK)
3. Freeport-McMoran (FCX)
Citi: “The copper rally over the past month from $5,700 a ton to over $6,000 a ton has occurred against a backdrop of flat to falling equity prices and bond yields, leaving copper looking overvalued by $220 to $420 per ton based on these historical relationships”.
Surged by a staggering 45% since mid-March.
Copper’s gain has been driven chiefly by concerns over strains on supply from key producers South America.
Thousands of copper workers have fallen ill in Chile, which is by far the world’s largest producer of the metal, accounting for more than a quarter of global supply.
Infections are also slowing the mining recovery in Peru, the second-biggest producer.
Freeport-McMoRan Inc., the world’s largest publicly traded copper company, said Monday that it sold about 8% more copper in the second quarter than it forecast earlier in the pandemic.
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