Copper June 2017
Mixed Signals for Copper Demand

China's refined copper Imports for January to April 2017 are down 418kt year on year to 1.01Mt. LME copper month-average cash price has eased for the third consecutive month in May. Freeport's 500ktpa Grasberg mine in Indonesia is producing and exporting concentrates but short and long-term unsettled issues remain.

The month-average LME copper cash price eased 1.5% in May to US$5,600/t (US$2.54/lb). This was the third consecutive month where the average price has fallen by close to 2%. Copper has been giving up some of the gains made from November 2016 to February 2017 since production resumed after disruptions at the Escondida, Grasberg and Cerro Verde mines and at the Gresik smelter. With the month-end price of US$5,658/t (US$2.57/lb) higher than the average and a turnaround from an increasing to decreasing number of LME copper short positions from mid-May, AME expects the June average price will be higher than the May average.  

Refined copper exchange inventories were little changed in May, ending the month at 653kt compared to 630kt at the end of April. LME stocks increased by 51kt to 311kt, while Shanghai Futures Exchange stocks declined by 31kt to 199kt, and COMEX stocks were marginally higher at 143kt.

Macro-economic conditions are mixed. Conditions in China have slowed, but stabilised, after a strong March Quarter. The US, however, looks better after a slow March Quarter with industrial production in April at a three-year high. Looking specifically at copper, Chinese apparent demand has weakened in early 2017 according to refined copper import, export and production data. Imports for January to April 2017 are down 418kt year on year to 1.01Mt. Domestic refined copper production over the first four months of 2017 is up by a smaller amount of 193kt to 2.86Mt. Refined copper exports over the same period are up 49kt to 124kt. Despite this, China’s output of copper products is up by 10% in the first four months of 2017.

Supply-side news during May was mostly of a longer-term nature rather than short-term disruption-related impacts to production, in contrast to the first months of 2017. Short and long-term matters remain unsettled at Freeport’s 500ktpa Grasberg mine in Indonesia. Production is being affected by a strike and high levels of absenteeism, and Freeport is reviewing underground development expenditure. A potential development in the medium-term mine supply pipeline is Ivanhoe and Zijin’s high-grade, large-scale Kamoa-Kakula project in the Democratic Republic of Congo (DRC). A preliminary economic assessment of 6Mtpa underground mines at both Kakula and Kansoka is in progress and is due to be issued in the September Quarter of 2017. AME estimates that at 12Mtpa, the two mines would produce a total of approximately 500ktpa of copper in concentrate.