Copper Above $10,000 First Time In Three Months Amid Multiple Factors

Copper prices vaulted over the $10,000/mt mark in trading Jan. 12 for the first time since October, as a result of multiple factors, market analysts said.

The London Metal Exchange three-months copper price was trading at $9,973/mt ($4.52/lb) as of 1130 GMT Jan. 13, against the closing price of $10,064/mt on Jan. 12.
Base metals prices were on the front foot again on Jan. 12, with protracted buying pressure resulting in copper pushing past the $10,000/mt mark as investors looked to commodities as inflationary pressures rose, analysts with UK brokerage Sucden Financial said in a report Jan. 13.

Commerzbank analyst Daniel Briesemann said in a research note Jan. 13 that the rise in the red metal was due a number of factors, commencing with the positive sentiment on the financial markets in the wake of the remarks made by US Federal Reserve Chairman Jerome Powell on Jan. 12.

Copper prices were also impacted by expectation of lower production at Canadian mining group Teck Resources, Briesemann said. The company had received a strike notice from the United Steelworkers Local 7619, which represents 1,048 workers at its ‘ Highland Valley Copper operations in British Columbia. According to the company website, Highland Valley’s 2021 copper production was expected to be between 128,000-133,000 mt, with lower production in the first half of 2021.

Another factor was the expectation that demand for electric vehicles may result in substantial demand for the metal in future, in other words that the copper market may potentially not be sufficiently supplied, Briesemann said.

“This expectation was fueled by strong electric car sales in China, as published yesterday [Jan. 12] morning,” the Commerzbank analyst said.

New energy vehicle
China’s new energy vehicle output and sales reached 3.55 million and 3.52 million units in 2021, up 159.5% and 157.5%, respectively, compared with 2020, the China Association of Automobile Manufacturers, or CAAM, said Jan. 12.

NEV sales accounted for 13.4% of the country’s total vehicle sales in 2021, which showed China’s NEV industry is now driven by the market instead of policy, CAAM said.

NEV sales hit an all-time high of 531,000 units in December, up 114% year on year and 11.1% from November, CAAM data showed.

Electric vehicle sales in developed markets like the EU and the US have recently paled in comparison with Chinese sales. For example, total EV sales combined from the EU and the US in November reached 293,614 units, the latest data from S&P Global Platts Analytics showed.

Inventories
Meanwhile, a downtrend in copper exchange inventories continues.

Shanghai inventories were low at 29,000 mt, nearing their decade low of 27,000 mt in December, while LME inventories are down 66% from August highs to 80,300 mt, analysts at UK brokerage SP Angel said Jan. 13.

Supply concerns continued to ease, given the conclusion of a number of wage contract renegotiations in 2021, Standard Chartered Bank base metals analyst Sudakshina Unnikrishnan said.

“We expect copper mine output to rise in 2022, and more markedly in 2023, as a raft of project expansions and new mines come online, leading to a larger concentrate surplus,” Unnikrishnan said.

Berenberg analysts said in a note that copper prices were expected to remain supported in the near-term.

“However, current tightness to reflect temporarily tangled supply chains … by year-end we see oversupply becoming more visible and monetary policy less accommodative,” Berenberg said.