Copper price surges to two-year high

Copper futures prices rallied on July 21 after the agreement of a massive economic stimulus plan in Europe, optimism about a Covid-19 vaccine and ongoing worries about pandemic-hit supply from top producer South America.

Copper for delivery in September trading in New York changed hands for US$2.9750 a pound ($6,560 a tonne) in early afternoon trade, up 2% from July 20 settlement.

Copper futures prices are on track for the highest close in two years and are now up by more than 50% from the Covid-19 lows struck in March.

Top-listed copper miner BHP announced on Tuesday that it expects its copper output to fall by between 5% and 14% in its next fiscal year to end-June 2021.

BHP (NYSE: BHP; LSE: BHP), which part-owns and operates Escondida in Chile, the world’s largest copper mine, said the expected fall in copper production is due to a reduction in its workforce related to Covid-19 restrictions.

The Melbourne-based company now expects 2020-2021 copper output of between 1.48 million – 1.65 million tonnes, down from 1.72 million tonnes produced in the year prior.

In a recent note, Capital Economics points out that output rates have fallen sharply in Chile, Peru and Mexico, which together account for 45% of global production.

Output is now at levels last seen in 2017 during a protracted strike at Escondida, which by itself is responsible for nearly 5% of worldwide production.

Customs data released last week showed China’s unwrought copper imports (anodes and cathodes) in June rose a stunning 50% from the previous month to 656,483 tonnes – a full 15% above the previous monthly record.

June cargoes were double that of the same month last year as the infrastructure and manufacturing sectors in China, responsible for more than half the world’s copper consumption, rapidly recover following the covid-19 slump.

Over the first half of 2020, imports totalled 2.84 million tonnes – up 25% year-on-year and on track to easily beat 2018’s annual record of 5.3 million tonnes.

June imports of copper concentrate fell unexpectedly, down 6% to 1.69 million tonnes from May, but still up 8.4% from June last year, due to disruptions at mines in Peru, China’s top supplier.

Another indication of demand outstripping supply is the decline in treatment and refining charges. TC/RCs paid by miners to smelters have fallen to an eight-year low, a sign of competition between refiners for available concentrate.

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