Post by
LongTView on Mar 22, 2023 6:23pm
Copper inventory is tight, China continues to consume
Since March 1, COMEX warehouse inventory has dropped from 17,072 tons and now today is 14,627 tons. This is really the North American inventory dropping and we see also China importing scrap from the USA, specifically 29,121 metric tons – not insignificant. In fact, Copper Scrap Imports were up 58% YoY in February. Today we saw in print:
“SHANGHAI, Mar 22 (SMM) - China imported 173,825.31 mt of copper scrap in February, a surge of 33.96% from the previous month and a year-on-year growth of 58.30%, according to customs statistics. “
China imported 29,121.55 mt from the United States, the largest supplier, up 8.84% month-on-month and 64.84% year-on-year.
No doubt from the drop in exports from Peru and Chile due to mine output dropping. On this front we see:
“SHANGHAI, Mar 22 - Peru is the second largest supplier to China. China imported 510,090.97 mt of copper ore and its concentrate from Peru in February, a month-on-month decline of 15.88% and a drop of 1.21% year-on-year”.
Chile is off as well and we see:
“SHANGHAI, Mar 22 - Chile is the largest supplier. In February, 697,580.21 mt of copper ore and its concentrate were imported from Chile, a drop of 8.38% month-on-month and 15.99% year-on-year”.
And on the LME inventory situation, as of March 1, 64,225 ton were reported, a 5 year low and it has increased on March 22 to 76,400, still bouncing along at a 5 year low. Look for LME inventories to drop going forward if Peru and Chile do not get back on track, as the copper has to come from somewhere.
So where do we go from here?
GS says the following today:
"In the copper market, the long-term outlook is very positive. In the short term we see copper prices at $10,500/mt, with a longer-term target of $15,000/mt. "Jeff Currie, Goldman's global head of commodities, told the Financial Times at the Commodities Global Summit on Tuesday.
According to news on March 21, the head of commodities at investment bank Goldman Sachs expects capital flight from China and the energy market and investment sector this month will drive a commodity super cycle after the banking industry raised concerns.
"As losses mount, they spill over into commodities," Jeff Currie, Goldman's global head of commodities, told the Financial Times at the Commodities Global Summit on Tuesday.
Lastly, BHP is ever bullish and, on the wire, today we see:
SHANGHAI, Mar 22 - Vandita Pant, chief commercial officer of mining company BHP, said on March 21 at the FT Commodities Global Summit that by 2030, as many as $250 billion of mine investment to meet the growth in copper demand caused by the energy transition will be required.
As I expect the PEA from Oroco to have a Capex of around 3 Billion, this means 8 projects the size of Santo Tomas will be needed and they do not exist.
All of which is why I expect to see higher yet copper prices this year. Note that copper broke $4.00 today and is now $4.04 per pound, in spite of a fed interest rate hike. Note that 15,000 per ton projected by GS is $6.80 a pound.