Shortages of copper and declining inventories could drive prices to levels beyond current record highs unless scrap supplies increase — scrap accounts for about a third of the roughly 30 million tonnes of annual global copper supplies.
As copper prices rise, the flow of scrap accelerates as the market attempts to cover the gap between demand and supply.
Copper for delivery in July was up 0.9% Tuesday afternoon, with futures trading at $4.7620 per pound ($10,476 a tonne) on the Comex market in New York.
“The copper market is tight, inventories are trending lower. There is a risk that prices of the red metal spike to $13,000,” said Bank of America analyst Michael Widmer.
“If our expectation of increased scrap supply, a nontransparent market, does not materialise, inventories could deplete within the next three years, giving rise to even more violent price swings that could take copper to $20,000.”
Bank of America expects a deficit of 186,000 tonnes this year and a shortfall of 369,000 tonnes in 2022, followed by surpluses in the two years after.
Unionized workers at BHP’s Escondida and Spence copper mines in the world’s top copper producer Chile are set to vote on a strike after contract negotiations hit a dead end, the group said in a statement.
Combined, Escondida and Spence account for almost 20% of annual copper output in Chile. The country is also giving bulls another reason to cheer as discuss an increase in mining royalties.
China’s massive physical purchases of refined copper have been the primary driver of the post-pandemic price rebound, but the Chinese impetus may be fading.
The country imported 4.4 million tonnes last year, up 1.2 million tonnes from 2019.
Refined metal imports have been trending lower since the start of the year and continued doing so in April. The Shanghai Metal Market Yangshan copper premium is currently assessed at $38.50 a tonne, the lowest point since 2017.
(With files from Reuters)
