US has second-longest mine development timeline in the world, S&P Global says
Mines in the US go from discovery to production in an average of 29 years.
The U.S. has become a more attractive market for copper traders—and for the actual metal.
Copper futures on the Comex have been trading at a premium to those on the London Metal Exchange in recent weeks, attracting more copper cathode, especially from South America, the world’s largest producing region. U.S. imports of cathode from Chile rose 37% in the first three months of this year from the prior quarter, according to data from S&P Global.
The stronger pricing in New York points to a robust economy in the U.S., where the Federal Reserve is now laser-focused on bringing down rising inflation, as well as the ongoing logistics woes that keep materials from going to where they’re immediately needed.
“The U.S. economy is relatively performing better than other economies, certainly than Europe,” said Bart Melek, global head of commodity strategy at TD Securities.
Commodities including copper are caught in the turmoil of Russia’s war on Ukraine. Even before the invasion, prices of raw materials rallied, with demand surging and supplies choked up due to pandemic-triggered supply-chain woes. Europe’s energy crisis, which is being worsened by the Ukraine war, has also seen factories curtailing capacity or closing due to higher power costs. Recent Covid-19 flare-ups in Shanghai add to concerns that port congestion will cause more delays in getting materials to where they’re needed.
“The flows are slowing down from Asia and Rotterdam,” Melek said. Along with the difference in demand, that means relative prices in North America are stronger, he said.
Investors are also moving at least part of their trade to the Comex copper contract following the LME’s nickel-trading crisis, according to traders. Open interest in Comex copper contracts has increased more than 12% since the London bourse reopened nickel trading in mid-March. That compared with a trader exodus across the LME’s six main metals following the unprecedented short squeeze in the exchange’s nickel contracts. Copper inventory at Comex warehouses rose 6.1% in the same period.
“It’d be logical to say that for risk mitigation reasons, you might want to be taking some hedging somewhere else,” Melek said.
(By Yvonne Yue Li)
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