Copper prices have struggled for direction over the second quarter-to-date. Demand fears continue to restrict the extent of upside moves, whilst supply disruptions at the mine level have more recently provided a floor to prices following the early-year sell-off. As a result, cash LME prices have spent much of the past month trading within a $5,900-6,150/t range.
A key theme in copper has been the divergence in trends in the concentrate and cathode markets over recent weeks. In the concentrates market, a sharp tightening of material availability has been highlighted by the weakening in treatment and refining charges since the start of the year. Supply disruptions have been in part accountable, notably in Chile where heavy floods disrupted output at a number of operations from late March. We now forecast Chilean production at a little over 5.8m tonnes this year. Meanwhile, likely in part reflecting recent worker-related disruptions, Freeport recently announced that it has downgraded expected 2015 sales from its Grasberg mine to 885 million lbs (401 kt). This is down from its late-January guidance of 1 billion lbs (453 kt).
In addition to supply disruptions, the ongoing strength in smelter and refined output has continued to drive healthy demand for concentrates. Meanwhile, robust offtake from traders, reflecting ongoing requirements for clean concentrates for blending, have had a notable effect in reducing spot terms for high purity concentrates. Looking ahead, however, maintenance shutdowns at some smelters in China and elsewhere in Asia scheduled for the coming months may temper concentrate demand somewhat…..
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