A case for copper?

[rederob]

LME cancelled warrants now outnumber live warrants, so anyone after spot copper is going to continue paying a premium:


Good chance we will now see a closing price above $4.30 for the first time since the last bull run.

 

[rederob]

Goldman Sachs calls copper “the new oil”​

Snippets:

Goldman forecasts a copper price of US$15,000 per tonne by 2025, up from the US$9,000 per tonne today. It estimates prices for the metal will average US$9,675 per tonne this year; US$11,875 per tonne in 2022; US$12,000 per tonne in 2023; and US$14,000 per tonne in 2024.​

And:

Goldman estimates “EV-related demand to amount to 2.4 million tonnes of copper by 2030 (vs. 210kt in 2020) with an additional 153kt of copper demand coming from charging stations (vs 14kt in 2020). We expect this demand to grow at a rate of 31% a year for the remainder of the decade.”​

​

When I began this thread back in 2007, energy from solar and wind was exceptionally expensive and I never included their potential in my very basic calculations. However, by 2030 these sources are expected to generate greater copper demand than EVs.
Recycling demand will remain strong.

 

[frugal.rock]

A case for one copper thread... concurrent threads is not good for the heads.

I had posted some charts in another copper thread, but here's today's picture:
View attachment 123393

 

[rederob]

A case for one copper thread... concurrent threads is not good for the heads.

The original thread at the other place was "Copper Charts" from memory and I believe Joe later chopped off "charts" from the title.
This thread was based on fundamental drivers of copper demand such as EVs and how price is affected.
I was going to add the ISCG info on the weekend, but it's latest data was only up to January and i think we have moved well past that time.
Most of charts and tables in this thread relate to supply and demand, especially via LME data. This year I picked up the first instance of backwardation which is usually the precursor to a bull market rally. Backwardation does not show up in typical price/volume style charts.
I also have not focussed this thread on explorers/primary producers, which the other thread picks up.
However, if Joe wants to integrate this into the other thread, that's fine

 

[rederob]

Usually when metal prices start to head into the stratosphere there is a massive inflow into warehouses - the supply response.
But LME warehouses are still seeing strong stock cancellations, and the copper price remains in backwardation:



Somewhat less volatile than LME are Comex's warehouses, where drawdowns have been recently consistent:

 

[rederob]

Backwardation has increased to $244:

Net additions of 8888 (incredibly lucky!) tonnes at SFE linked warehouses:



Given the price of copper and lack of any meaningful warehouse inflows, the case for copper to keep running higher remains sound... as the latest spot prices show:

 

[rederob]

Is this a crazy headline?

"Copper to surge at least seven-fold before this bull market is over - Goehring & Rozencwajg"​

They are not talking about this year or the next, but are looking at a range of issues that will affect the price over the coming decade. Renewable energy and electrification generally will be key drivers, but they clearly point to an impending failure from a supply response.
In terms of global reserves of copper, the pie slices like this:




An interesting statistic from the above is that BHP's Olympic Dam has the 4th largest copper reserve, but is only the 20th largest producer. BHP has always wanted to do a lot more at Olympic Dam and the surging copper price might be their catalyst.

 

[rederob]

Yesterday LME's 3 month bid went into contango for the first time in months, and the 12 month bid narrowed appreciably, although remains firmly in backwardation.

As a result the upward price advance confirmed a turnaround:

Although COMEX warehouse levels show a decline, there have only been outflows in the past week, so this chart only tells half the story:

 

[rederob]

I meant to show LME Warehouse levels above, as copper on warrant has been unchanged at 74250 tonnes for over a week now, with small daily outflows:

Reports suggest China has not bought around a million tonnes of copper concentrate from Australia due to the trade dispute, so that's a lot of potential supply in the wings. Offsetting that are machinations in Chile (world's biggest supplier) with BHP and also the government, not to mention covid disruptions, all making the supply response a bit of crap shoot.

 

[rederob]

Copper off the boil!
Backwardation withering away:
Given that high prices have not seen copper flooding into warehouses, it's likely copper prices will hold above $10k for some time.

 

[rederob]

A tale of two continents.
At LME we have had small stock builds, and backwardation about to end:

But in China we have had firm daily withdrawals over the past week:

Given the petty numbers involved, tight supply is the norm and consumers in China who have been deferring purchases have literally been taking stock.

 

[rederob]

Although copper has come off historic highs over recent weeks, Chinese inventories have been declining steadily over the same period, dropping almost 30000 tonnes in the past 3 weeks.


Meanwhile at LME warehouses slight stock builds have been occurring, pushing the copper price back to contango:

What is undeniable is that the copper market is incredibly tight globally, as even Comex warehouses have been in continuous decline for over a month. So we know that copper's high price has yet to lead to any meaningful supply response.
On the other hand, the US stimulus package has barely started to make a difference, so in coming months copper demand there is likely to sustain the metal's high price.

 

[rederob]

While LME's copper warehouses have had steady inflows over the past few weeks, the opposite has occurred for Comex:
and Shanghai:

If I were to hazard a guess, I would say that Chinese consumers who have an urgent need for copper in their factories are now taking advantage of slightly cheaper prices and eating into stock.
The interesting takeaway is that over the past few months the total amount of copper in the 3 warehouse chains is relatively unchanged. So while copper prices have fallen considerably over the fortnight, the global picture really has not changed.

 

[Garpal Gumnut]

Thanks @rederob I’m still v bullish Cu.

gg

 

[Sean K]

Anyone else following Chile politics and what happens when the new taxes on copper and lithium get passed and introduced?

I've got a feeling several miners will become unviable and will have to shut down. Can't say which ones just seen that statement made by several players including BHP's head of Americas.

Shutting down mines is going to likely put even more upward pressure on prices with no new large scale mines on the horizon.

Also makes my little play into HCH look foolish at this time.

 

[Dona Ferentes]

Comments from Glencore’s about to retire CEO, Ivan Glasenberg make it easy to understand the metals’ current market strength. He told a forum in the Middle East on Tuesday that a supply gap was growing in the metals necessary for the world to replace fossil fuels with renewable energy, but he stopped short of predicting a so-called super cycle.

Glasenberg said at the Qatar Economic Forum that copper supplies needed to increase by one million tonnes a year until 2050 to meet an expected demand of 60 million tonnes.

“Today, the world consumes 30 million tonnes of copper per year and by the year 2050, following this trajectory, we’ve got to produce 60 million tonnes of copper per year,” he said.

“If you look at the historical past 10 years, we’ve only added 500,000 tonnes per year … Do we have the projects? I don’t think so. I think it will be extremely difficult,” according to Reuters.

 

[Beaches]

From an interview earlier this month

James Gerrish:​

So, commodities are cyclical, in so far as the price incentivizes new production to come on-stream. So, it begs the question, how much new production can global copper production in any meaningful scale can come on-stream over the next coming years? Is the market constrained or is high price incentivize new mine development?​

​

​

Peter O'Connor (Shaw and Partners):​

I love this because the easiest narratives a player in the market uses are the ones they have no idea about. They just use them because everybody hears the same thing and they just go, "Oh, yeah, great. Copper's in short supply. Why? Because grades declining and strip ratio's going up." Nobody really has a clue what they're talking about. Same as when they talk about a supercycle, I don't think anybody really understands what they're talking about.​

​

Now, I'm being facetious. But the copper market will be tight at times and not at others. Over the next three years, it's expected the copper market will be in surplus. Aside from this demand pulse, copper should be in '22, '23, '24, likely in a slight supply surplus, as new mines are coming on in Latin America as well as in Africa and in Australia, and BHP alone is bringing on 300,000 tons of copper, and they're very happy to tell the whole world that, over the next two to three years.​

​

So, the copper market, in terms of mine supply, is about 18 million tons. Grows at about 3% per annum. That's about 500,000 tons of new copper per year. BHP can do... their next growth phase, that's half a year's supply. That's one mine, one company. So, copper suppliers traditionally, other than short squeezes or periods of one or two year squeezes has typically caught up. Why? Because everybody's drilling the world for copper because copper's one of the easiest commodities to find, along with gold. Newcrest, Rio, BHP, Glencore, they're all looking for copper. So, copper's likely to have pinches like now. There may be another EV-related one, which everybody's trying to pin it down to now in 2025. Right now, supply and prices incentivize producers to look everywhere in the world. And how many new companies want to be in copper at the moment? Not least we've got an IPO that just came out literally yesterday in Australia. So, I think you'll find supply has traditionally kept pace, albeit, at times, it does fall behind, like right now that demand pulse is greater than supply availability.​

Full transcript here:

Direct from the Desk: A deep dive into Oz Minerals

In the fourth episode of 'Direct from the Desk' I'm joined by Senior Analyst Peter O'Connor to take a deep dive into Australia's no 1 copper stock, Oz Minerals (ASX:OZL). Oz is Australia's premier copper focused miner with a global footprint. It generates the bulk of its earnings from copper...

www.livewiremarkets.com

.

 

[bk1]

So, I think you'll find supply has traditionally kept pace,

But we are not in a period that could be called "traditional".

Producers No1 and 2, Peru and Chile want to raise the royalty tax on copper miners. DRC, the biggest producer in Africa has banned the export of copper and cobalt concentrates.
The goodthinkers are demanding an instant decarbonisation of the planet. Belt and Road Initiative. And now, Build Back Better World.
Three scenarios that entail massive amounts of Copper.
Either BRI subsides/implodes under the weight of debt, or, B3W turns out to be a mirage of well intentioned thought bubbles, or, our proud aussie cows stop chewing the cud and farting.

 

[SyBoo]

China to auction copper, aluminium and zinc from state metal reserves in bid to curb soaring commodity prices | South China Morning Post (scmp.com)

some snippets;

The National Food and Strategic Reserves Administration said in three separate notices it would auction 20,000 tonnes of copper, 30,000 tonnes of zinc and 50,000 tonnes of aluminium on July 5 and July 6.

For copper, the auctioned volume is 2.3 per cent of May’s refined output...

The release of state metal reserves in China is one of a number of attempts by Beijing to cool a stellar rally in commodity price that has squeezed manufacturers’ margins.

“We expect more sales from reserves combined with slower underlying demand and seasonal weakness to put a lid on prices in the very near term, but we then expect a rally to new highs over the next 3+ months,” Jefferies analyst Christopher LaFemina said in a note.

BTD

 

[rederob]

Today saw LME finally add a decent amount of copper to their warehouses, and futures prices have reacted accordingly: