Copper rides the trade war roller coaster
The outlook for copper is uncertain for the balance of 2019 as China, the largest consumer of the red metal, is embroiled in a trade war with the US.
Copper prices have declined in recent weeks on fading US-China trade talk optimism and amid uncertainty over a Chinese plan to restrict imports from 1 July on eight different categories of scrap, including copper, aluminum and steel.
Copper has largely tracked the ebb and flow of the US-China trade conflict, attempts to defuse it and its impact on global trade and the world's two largest economies.
Trade war volatility
Comex copper prices took a dip in March 2018 when the US announced tariffs on imports of steel and aluminum, with the spot price dropping below $3/lb for the first time that year. Copper then hit its high for the year near $3.30/lb in June, when workers at the BHP Escondida mine in Chile threatened to strike during union wage negotiations.
Comex copper fell by nearly 10¢/lb on 11 July as 25pc reciprocal tariffs on $34bn/yr of goods were implemented on imports from China and the US.
In late August 2018, additional tariffs of $16bn/yr tariffs were implemented on imports from China and the US and spot Comex fell to $2.6525/lb.
Tariffs on $200bn/yr of Chinese imports to the US and $60bn/yr on US imports to China were put into effect on 24 September, which pushed copper down from nearly $2.82/lb to close out October at around $2.66/lb.
It pushed up again to around $2.80/lb at times in November and December, then fell to below $2.60/lb in early January when China's factory purchasing managers' indexes dropped well below 50, showing factory contraction in December. But prices rebounded on lower stockpiles, and copper picked up a tailwind when the US pushed back a tariff deadline in mid-February, which pushed copper up to $2.95/lb to close February.
Comex then took another dip in late March as copper scrap deliveries were reported falling by 50pc year on year to China. Copper dropped 6¢/lb in one day to $2.83/lb.
On 1 May, copper dropped by 10¢/lb after China's April factory PMI came in lower than expected and China was on holiday for the week.
Then in the second week of May, the US imposed additional tariffs on $200bn worth of Chinese and threatened additional tariffs on more than $300bn other goods. Beijing retaliated, saying it would levy tariffs on $60bn of US imports on 1 June. Trade talks were broken off and the rhetoric heated up on both sides.
Spot Comex fell to $2.686/lb on 22 May from $2.7585/lb on 16 May and is at its lowest since late January.
Scrap impact
Weak Comex pricing has had a knock-on effect for the US copper scrap market.
Difficulties shipping scrap copper to China has made for additional material available in the domestic US market, putting a headwind against strengthening spreads for scrap despite the drop in Comex.
The current climate in the US of a slowdown from copper and brass mills has some dealers and brokers concerned. With warmer weather, May and June are typically a busy time for mills as they ramp up production to make future orders before many mills and their consumers take a July shutdown for preventive maintenance.
That increased production and additional buying of scrap has not materialized for many, and mills have been restrictively buying or out of the market all together and even looking to move scheduled deliveries further out.
Related news posts
Japan’s Daihatsu fully reopens domestic auto operations
Japan’s Daihatsu fully reopens domestic auto operations
Tokyo, 7 May (Argus) — Japanese car manufacturer Daihatsu resumed operations at Kyushu and Osaka on 6 May and 7 May respectively, marking the full reopening of its domestic plants. Daihatsu produces around 400,000 units/yr and 6,000 units/yr at Kyushu in south Japan and Osaka in west Japan respectively, according to a company representative that spoke to Argus. Combined production at these two plants accounts for around half of its total domestic output. It suspended all its operations in December 2023 after it was accused of tampering with safety test results. Daihatsu partially resumed operations in February and March but the Kyushu and Osaka plants remained closed. The company's March output fell by 65.8pc from a year earlier to 30,453 units , although it recovered from 6,692 units and none in February and January respectively. The country's overall industrial production index increased by 3.8pc from the previous month, according to the ministry of trade and industry last week, mostly driven by a production recovery of passenger vehicles. By Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Brazil unlocks relief spending to flooded state
Brazil unlocks relief spending to flooded state
Sao Paulo, 6 May (Argus) — Brazil's president Luiz Inacio Lula da Silva signed a decree to ease relief spending to Rio Grande do Sul state, which has been hit with historically heavy rainfall and floods. "We are going to do everything in our power to contribute to Rio Grande do Sul's recovery," he said today after signing the decree, adding that was only the first of "a large number of acts" for the state. The decree recognizes the state of emergency in Rio Grande do Sul and allows the federal government to grant funding and tax waivers to the state without having to comply with spending limits. In addition, it makes rules for public authorities to contract services and purchase products more flexible. The decree still needs both senate and congressional approval — which should be hasty, as both the senate and house leaders were present at the decree's signing. It is still not clear how much money it will take to rebuild the state, chief of staff Rui Costa and planning minister Simone Tebet said. But the minister of regional integration Waldez Goez estimated that it will take around R1bn ($200mn) to rebuild the state's highways. Rio Grande do Sul has been hit with heavy rainfall since 29 April. The highest volumes reached the central areas of Rio Grande do Sul, with cities receiving rainfall of 150-500mm (6-20 inches), regional rural agency Emater-RS data show. The monitoring station of Restinga Seca city, in the center of the state, recorded rainfall of about 540mm. Rainfall in Rio Grande do Sul overall surpassed 135mm in most of the state, according to the US National Oceanic and Atmospheric Administration (NOAA). State capital Porto Alegre is expected to receive more rain later this week, according to Rio Grande do Sul-based weather forecaster MetSul. MetSul warned that parts of the Porto Alegre metropolitan area could remain uninhabitable for weeks or months. The floods have left at least 83 dead and 111 missing, according to the state government. An additional 130,000 people have been displaced from their homes. By Lucas Parolin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Floods halt firms' operations in Brazil's south
Floods halt firms' operations in Brazil's south
Sao Paulo, 6 May (Argus) — Several Brazilian companies have suspended operations in the southern state of Rio Grande do Sul because of heavy rainfall that has caused severe floods and infrastructure damage. Flooding from the record rains has left at least 83 dead with 111 people missing, according to the state government. More than 23,000 people have been forced from of their homes amid widespread damage, including washed out bridges and roads across several cities. The dam of the 100MW 14 de Julho hydroelectric plant, on the Antas River, ruptured last week under the heavy rains . Power generation company Companhia Energetica Rio das Antas, which runs the plant, implemented an emergency evacuation plan on 1 May. Brazilian steelmaker Gerdau said on Monday that it suspended its operations in two mills at the state until it can ensure "people's protection and safety." The company did not disclose the produced volume of steel at those two mills. Logistics company Rumo partially interrupted operations and said that "damages to assets are still being properly measured". Petrochemical giant Braskem shut down its facilities at the Triunfo petrochemical complex as a preventive measure because of "extreme weather events" in the state, it said on 3 May. The company added there was no expected date to resume activities there. Braskem operates eight industrial units in Rio Grande do Sul that make 5mn metric tonnes/yr of basic petrochemicals, polyethylene and polypropylene, according to its website. By Carolina Pulice Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Panama's new president faces copper, canal issues
Panama's new president faces copper, canal issues
Kingston, 6 May (Argus) — Stand-in candidate Jose Raul Mulino will take office on 1 July as president of Panama with a challenge to decide on the future of one of the biggest copper mines in the Americas. The 64 year-old lawyer won yesterday's presidential election in the central American country, promising a "pro-investment and pro-business" policy. He won with 35pc of the vote and an about 10 percentage point lead over his next closest rival, Ricardo Lombana. But he has delivered no comment on the future on the shuttered Canadian-owned copper facility that is one pillar of the country's economy. His government will use public works projects and incentives for foreign investors to restore economic growth, Molino said, without giving details. Panama also faces a crippling drought that has lowered water levels and reduced transit through the economically important Panama Canal. First Quantum intends to meet the new government to discuss reopening the mine, the company's chairman Robert Harding said in March. "Whatever government is elected, we will work with it," Harding said. "We would like to see this mine reopen." Panama closed the $10bn Cobre Panama mine after a supreme court ruling in November that First Quantum's contract was unconstitutional. The mine accounted for 5pc of the country's economy and 1.5pc of global copper output, according to the government. The shutdown will limit the country's economic growth to 2.5pc this year against 7.5pc in 2023, the IMF has forecast. The supreme court's order to close the mine followed weeks of protests over the terms given to First Quantum in October. Protests wracked the country as opposition parties, trade unions, environmental lobbies and non-governmental organizations objected to the terms. "Although the mine's owners would be happy to negotiate a reopening with the new administration, this is a very hot and controversial matter for the new government," a senior official of the outgoing government of President Laurentino Cortizo told Argus today. "Any suggestion of negotiating a reopening would again bring people on the streets." Mulino ran with former president Ricardo Martinelli until the courts disqualified Martinelli because of a money laundering conviction. Martinelli had proposed that Panama renegotiate the contract with First Quantum to secure higher royalties and a stake. "Mulino is a mentee of Martinelli, but I doubt he would stoke public anger by seeking to reopen the mine," the official said. Cobre Panama produced 331,000 t in 2023, 5pc less than 2022 output, First Quantum said. By Canute James Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more