Copper Price Slides on Economic Growth Fears
August 2018
very small refined copper market surplus of 33kt is forecast in 2018 on demand growth of 2.1% to 24.24Mt and production growth of 3.1% as output returns to more normal levels after supply disruptions in 2017.

Potential for supply disruptions is an upside risk to the price and market balance forecasts. The likelihood of a strike at Escondida has increased as BHP and workers have been unable to agree on a new labour contract. Disruption at Grasberg is less likely after Freeport, state owned Inalum and Rio Tinto agreed in July on a new ownership structure for the mine.

The month-average copper price fell 10.3% in July 2018 to US$6,251/t (US$2.84/lb); its lowest since July 2017. Copper, and base metals prices in general, declined due to concern about the impact on global economic growth of trade disputes between the United States and its trading partners, particularly China. The US and China are ratcheting up import tariffs against each other. Exchange refined copper stocks declined for a fourth consecutive month, falling steeply by 123kt to 638kt at the end of July.

There are signs of possible cooling in China’s industrial activity. The Purchasing Managers’ Index eased to 51.2 in July from 51.5 in June and 51.9 in May. Industrial production (IP) growth of 6.0% for June was down from 6.8% in May 2018. Investment in fixed assets increased 6.0% over January to June 2018, compared to stronger growth of 8.6% in January-June 2017. AME has reduced its 2018 refined copper demand forecast for China from 3.0% growth to 2.5%.

The closure of Vedanta’s 400ktpa Tuticorin smelter in India and reduced concentrate processing at Glencore’s PASAR smelter in the Philippines due to issues with its acid plant have increased concentrate availability and driven up spot treatment and refining charges (TC/RCs). Lundin Mining reports spot TCs have risen from US$52/t of concentrate in April 2018 to US$74/t in June. In China, spot TCs have increased from approximately US$74/t in April 2018 to US$85/t at the end of June.