Copper has bounced back strongly from last week’s slide and shaken off news of the first sale of the metal by China from its strategic reserves to try put a lid on prices, rising on each of the three trading days this week.
The Chinese government said on Tuesday that copper and other metals would be auctioned next month in varying lots.
The sales were threatened earlier this month by the Chinese government as it tried to force commodity prices lower – especially iron ore, copper and coal.
The Comex price jumped 9.65 US cents on Wednesday or nearly 2.3% to $US4.3310 a pound after the two-month low late last Friday in the wake of the Fed’s changes to interest rate and inflation forecasts.
Tuesday saw the Comex front month price rise more than 1%, up from Friday’s low of just over $US4.12 a pound.
On the London Metal Exchange, three-month copper rose 2% to $US9,482.50 per tonne – $US1,300 a tonne short of the record high of $US10,724 a tonne in May.
Wednesday’s rose took the gain this week to 16.85 US cents as traders chased the metal in a more confident fashion.
Helping Wednesday’s gains was news that major economies, including the US, the eurozone, South Korea and Australia – are doing much better than they were a month ago, according to the first results from activity surveys of manufacturing and services.
The surveys showed the eurozone’s performance the strongest in 15 years while the pace of activity in the US is now running at an annual rate of 7% growth in GDP, according to some latest forecasts, with manufacturing at an all-time high.
This news has helped mute the impact of the Fed’s change of forecasts (and more comments on the timing of rate rises from Fed officials on Wednesday) and China’s sales threat.
China’s state reserves administration said it would publicly auction a total of 100,000 tonnes of non-ferrous metals early next month in the first round of a release from its stockpiles as threatened by the government earlier this month.
The National Food and Strategic Reserves Administration said in three separate notices it would auction 20,000 tonnes of copper, 30,000 tonnes of zinc and 50,000 tonnes of aluminium on July 5-6.
The amount of zinc being sold is equivalent to 5.7% of China’s monthly production. For copper, the auctioned volume is 2.3% of May’s refined output and for aluminium it is 1.5%.
The copper and zinc sales will take place on an online platform belonging to state-owned miner and metals trader China Minmetals Corp, while the aluminium auction will be on a site operated by another state-run firm, Norinco, Reuters reported.
At Wednesday’s close, copper is still up 23% year to date, but is still down more than 7% so far in June.
Despite the hectoring and threats from China, comments from Glencore’s about to retire CEO, Ivan Glasenberg make it easy to understand the metals’ current market strength.
He told a forum in the Middle East on Tuesday that a supply gap was growing in the metals necessary for the world to replace fossil fuels with renewable energy, but he stopped short of predicting a so-called super cycle.
Glasenberg said at the Qatar Economic Forum that copper supplies needed to increase by one million tonnes a year until 2050 to meet an expected demand of 60 million tonnes.
“Today, the world consumes 30 million tonnes of copper per year and by the year 2050, following this trajectory, we’ve got to produce 60 million tonnes of copper per year,” he said.
“If you look at the historical past 10 years, we’ve only added 500,000 tonnes per year … Do we have the projects? I don’t think so. I think it will be extremely difficult,” according to Reuters.
Copper demand is rising because of growing demand from renewable energy and electric vehicles.
The nickel and cobalt markets are facing similar supply deficits over the next few decades. Glasenberg said nickel supplies needed to grow by an extra 250,000 tonnes a year compared with a historic rate of just 100,000 tonnes.
He projected annual nickel demand to rise to 9.2 million tonnes from the current 2.5 million tonnes.
Australia has plentiful reserves of both copper and nickel.
Iron ore prices rose again – up $US1.69 a tonne for 62% Fe fines from the Pilbara and delivered to northern China. The price of 58% Fe fines rose $US2.74 to $US184.45 a tonne and 65% Fe fines from Brazil jumped $US2.60 to $US251.80 a tonne.
For the second day in a row the Metal Bulletin reported there are rumours of an easing in the crackdown on pollution and capacity usage in Tangshan, the major steel producing centre in northern China (it produces around 144 million tonnes of crude steel a year).
(Chinese hard coking coal prices are now more than $US296 a tonne (for the high-quality Queensland Bowen Basin type exported by BHP) and rising as the country’s self-defeating ban on Australian imports helps drive prices higher).