Starting this thread for general discussion and analysis on copper.
Sustained increase in demand expected in the future
Copper doesn’t get much attention as lithium when it comes to commodities where demand will outstrip supply.
The world’s metals producers stand to benefit from increasing electrification, and not just in the transport sector. BloombergNEF estimates that global copper demand in both the clean power and the clean transport sectors will double in the next decades, to almost 5 million tons per year. Copper demand this year is expected to be about 24 million tons, so that jump would be a material increase.
Prices have increased steadily in recent months, and are consolidating now. On the bullish side, Goldman is predicting record prices by mid-year, and some say we might see another copper squeeze. On the other hand, recessionary forces are in motion and this might temper some of the demand. Still, commodities are one of the better plays during slowdown, and EVs as a sector is not slowing down.
Thanks for starting this thread, bud!
Retail suffers from short term memory loss, as always. Alerts help.
Demand for copper (and other metals) will just keep rising, and supply will be tough-er.
Long term play fosho.
Not one to catch a falling knife, but definitely something to keep an eye on. In the long term, copper demand will outstrip supply, so this will turn. And might go through an explosive squeeze too.
Two additional complications:
There was some whisper of some major trading firm dumping their commodity trades at the end of Q2, as recession fears became real
The ever-strong USD is also weighing in on the price - if dollar weakens, the sell pressure could ease.
That was a very rapid pricing in of recession risk. Copper producers are objecting vehemently to this drop, saying it does not reflect reality:
The “sudden and unexpected” decline in copper prices during Q2 has occurred despite “no significant impact in physical demand” for the metal, Freeport McMoRan (NYSE:FCX) CEO Richard Adkerson said Thursday after the company posted a lower than expected quarterly profit.
There’s “a serious disconnect” between the physical copper price and the copper market, which is “tight” and the metal’s current beaten-down price is “unsustainable,” Adkerson told today’s earnings conference call.
…
Copper’s rout has left prices too low to support new mining development, Adkerson said, which would add to future supply deficits of the metal.
Not initiating any plays yet, as copper is one of those that does unpredictable things, between natural demand and supply, China and the London Metal Exchange shenanigans… but keeping an eye on this. Once markets start pricing in post-recession recovery, maybe in 6-9 months, copper should shoot up sustainably.
LME copper warehouse levels continue to be quite low. (S1, S2)
Now, global slowdown could very well explain away these low numbers, but copper’s one of those things that has tremendous demand going up with time. Might initiate a small position in CPER and then add if it keeps going up.
From a start guarding trains full of metal from thieves on freezing winter nights, He Jinbi built a copper trading house so powerful that it handles one of every four tons imported into China.
A born trader with an infectious sense of humor, the 57-year-old grew Maike Metals International Ltd. through the rough-and-tumble rush for commodities in the early 2000s, to become a key conduit between China’s industrial heartlands and global merchants like Glencore Plc.
Now Maike is suffering a liquidity crisis, and He’s empire is under threat. The ripple effects could be felt across the world: the company handles a million tons a year — a quarter of China’s refined copper imports — making it the largest player in the most important global trade route for the metal, and a major trader on the London Metal Exchange.
It is unclear what he did, exactly. But rumors are he used the same goods as collateral multiple times, is now in a financial crunch, and unable to deliver on said goods. He might be short too, like the nickel trader. (They go short as a hedge, but then when margin calls come… )
Unless the Chinese govt bails him out, there is a chance this triggers a squeeze in the copper markets.
The first position is very risky and will likely not amount to anything. The second one gives a four month runway for something to break.
Note that macro is not supportive of this play - China is slowing down more and more, so there should not be a secular increase in demand anytime soon. This banks on inefficient markets being really inefficient some of the time, resulting in outsized moves.
And Taking COPX as well
$29c 10.21.22
$30c 11.18.22
Starter positions and will play by ear. Right now when I think commodities, I think Oil, Gas, and Copper…So I think this may get more attention that others, because of recent headlines
The London Metal Exchange (LME) is planning to discuss banning new deliveries of Russian metal such as aluminium, nickel and copper so its warehouses cannot be used to offload hard-to-sell stock, three sources familiar with the matter said.
In addition to the copper plays discussed above, the broad-based XME and the more specific DBB are other options. DBB is zinc, aluminum and copper, two of the three metals affected by this move.
We may need a bit more confirmation though as this could just be reaction to the news; prices were falling earlier because :recession:.
From the FT, on the increasingly tightening copper physical market.
Global copper stocks have fallen to perilously low levels, one of the world’s largest commodity traders Trafigura has warned.
Speaking at the FT Mining Summit on Thursday, Kostas Bintas, co-head of metals and minerals trading at Trafigura, said the copper market is today running with inventories that cover 4.9 days of global consumption and is expected to finish this year at 2.7 days, according to its own forecasts. Copper stocks are usually counted in weeks.
The price of copper, used in everything from wind turbines, electric wires to electric vehicles, is now trading around $7,400 a tonne, some 30 per cent lower compared to early March, when it was trading above a record $10,000 a tonne.
Limited inventories raise the risk of a sudden spike in prices should there be large drawdowns and a dash among traders to secure supplies.
While the strong dollar and global recession fears have weighed on copper prices in recent months, executives in the global metals industry argued on Thursday that limited supply in the market remained supportive of prices.
“While there is so much attention being paid to the weakness in the real estate sector in China, quietly, the demand for infrastructure, electric vehicle-related copper demand, more than makes up for it,” Bintas said. “It actually not only cancels completely the real estate weakness, but also adds to their consumption growth increase.”
FCX is a chart that I used to look at for copper miners a few months ago.
I just set up the s/r lines. It looks to be testing the upper range of recent consolidation with volume. Below is a daily chart, see volume at the bottom.
I’m still catching up to this thread but this article caught my attention:
Kostas Bintas, Trafigura’s cohead of metals and minerals trading, said at the FT Mining Summit on Thursday that inventories can currently cover 4.9 days of global consumption and could finish the year at 2.9 days. For comparison, copper inventories are typically counted in weeks.
Likely on rumors that China is looking to stop the zero-covid policies. If combined with major stimulus packages, could lead to another commodity supercycle. There’s also the fact that copper inventory has fallen more - apparently its 3 days worth of supply.
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