Copper climbed on Monday as fresh evidence of physical tightness in China and a growing tally of weather-hit output in Chile outweighed jitters over the US-Iran conflict.
Comex copper for September delivery rose 1.3% to $6.35 a pound (just under $14,000 a tonne) by early afternoon in New York, bringing the red metal within 5% of the record set in early June.
Three-month copper on the LME added 0.6% to $13,608 a tonne in London morning trade. The premium is up from about $340 a tonne last week, though far from the $2,600-plus blowout of last summer’s tariff panic. Copper is up about 9% in London this year and more than 13% in New York.
The premium paid for imported copper over local supplies in China, a closely watched gauge of appetite in the biggest consuming nation, widened to $100 a tonne on Friday, according to Shanghai Metals Market data. That is the first time the measure has reached three digits since May last year, up from just $20 a tonne in late January.
Beijing’s months-long crackdown on the so-called invoice economy has squeezed scrap processors, pushing buyers toward refined metal. “We attribute the recent tightening mostly to substitution from scrap into cathode, rather than to end demand,” Goldman Sachs analysts including Lavinia Forcellese wrote in a note on Monday. “Tighter VAT enforcement on scrap in China has constrained domestic scrap circulation.”
Inventories point the same way. Stocks in LME-tracked warehouses fell on Friday to their lowest since March, Chinese stockpiles sit at the bottom of their seasonal range, and traders are pulling metal out of the LME system to ship to China, Bloomberg reported. Comex warehouses, by contrast, hold record copper after eight straight quarters of builds.
Figures compiled by veteran metals analyst John Gross in his weekly Copper Journal put numbers on the divergence: Shanghai exchange stocks slid 20% last week to 79,909 tonnes and are down 45% this year, while Comex inventories rose 16,821 tonnes to a record 630,293 tonnes, an increase that included the first 6,708 tonnes delivered into a newly added warehouse in Mobile, Alabama.
Chile’s wet winter
South32 said on Monday that payable copper from its 45% stake in the Sierra Gorda mine fell to 16,000 tonnes in the June quarter from 17,700 tonnes a year earlier, missing analyst estimates, after storms earlier this year forced a temporary halt to processing at the northern Chile operation.
Antofagasta last week reported a 9.5% drop in first-half production to 285,000 tonnes and lifted its cash cost forecast to a range of $2.40 to $2.60 per pound on higher fuel prices. Chief executive Ivan Arriagada said inflationary pressures have persisted across the mining industry because of disruptions in oil and other feedstock markets.
Further south, last week’s storm killed three people and forced Codelco to halt surface operations at its Andina mine and ore shipments from El Teniente.
Copper equities rode the move: Freeport-McMoRan rose 0.6%, Southern Copper 1.3% and First Quantum 1.8% in morning New York trade, while Antofagasta’s US-traded shares jumped 3.8%.
(With files from Reuters and Bloomberg)