Copper is almost out of order. It is understood that copper has recently been almost completely sold out with very little spot sales, but on the other hand there are also industry reports that there is a reasonable amount of Chilean cathode copper being tendered for sale. Although no trading conditions were announced, it was revealed that Chilean cathode copper bidding transaction only sold one transaction. That is, EM Nano sold 300t non-LME registered SXEW grade copper, and the premium for delivery in November last year was USD 67/t. In addition, Etna has a 1200t cathode copper bidding transaction, but it has not yet achieved results, and it is expected that the general sales of copper will actually flow into the LME. However, the number of LME inflows is largely offset by the outflow amount, which is roughly 2:1. Although there is in fact a certain amount of copper flowing into the LME, there are indications that not all producers have sold out. However, these inflows to LME copper are due to the fact that consumers have reduced the distribution of raw copper demand and prefer high quality scrap. This is due to the growth of industrial production and the continuous rise in the price of copper, resulting in not only adequate supply of scrap copper, but also low prices.
It is understood that at the beginning of last year, consumers carefully ordered a small amount of copper according to their predictions, but as time went by, demand picked up strongly, which enhanced market confidence and gradually added orders. Although there is a clear contradiction between consumers and traders, after negotiation, they still order from the trader and make up the required copper. According to traders, consumer demand and spot trading were higher than usual in 2010. In any case, however, consumers’ purchases from traders are still relatively small, and in the unstable market environment they must be supplemental temporary losses. Because in this case to add a small amount of deficiency, the best way is to make up for it by the traders.
According to reports, there are indications that the shortage of spot copper cathode market has caused the continuous decline of copper stocks in U.S. and European LME warehouses. It is estimated that the U.S. deficit of 40,000-50,000 tons of supply and demand in 2010 is not surprising at all, and this has also caused the decline of stocks in exchanges. It is reported that during the financial crisis of 2008 and 2009, US inventories increased by 300,000 tons, of which the LME stocks reached 223,000 tons and the COMEX reached 76,000 tons. In 2010, the cancellation of warehouse receipts by the United States LME remained high, and it has been growing recently. The cancellation of the warehouse receipt symbolizes that the copper will be transferred from the exchange. From the end of last March to the end of last year, the average LME copper stocks in the United States have steadily dropped by 400 tons per day, and the inventory of comexes is also 30% lower than the high point in February last year, of which only 3,000 tons was dropped in November of last year. With the steep rise in freight costs, the US spot premium has reached 5 to 6 cents per pound. Judging from the US contract of sale in 2011, Codelco of Chile reached a premium of 0.5 cents per pound.
In Europe, the general situation is similar to that of the United States. As traders continue to release copper from the exchanges in order to meet the small-scale demand of the spot market, only in November last year, LME stocks fell by more than 5,000 tons. As a result, spot premiums increased by $5 to $10/t to $100 to $110/t, which also led to the fact that LME's actual inventory level fell to only 34,000 t, the lowest level since July 2008. In contrast, the U.S. inventory reached 265,000 t. For this reason, it is estimated that there is less room for further decline in European stocks than for the United States. However, given that the number of written-off warrants since March of last year is still only 10% of the total inventory, the pro-rata basis may still decline.
The increase in the supply of sufficient inventory in the Chinese market compared with the decline in the shortage of cathode copper supply in the United States and Europe, the Asian market, especially the Chinese market is different, and the supply of sufficient inventory has increased. Consumer inventories can generally satisfy more than two months of demand. And at the end of last year, Shanghai Stock Exchange (SHFE) copper inventories also rose to 126,736 tons, which was an increase of nearly 40,000 tons from the end of September. From October to November, it increased by 20,000 tons. At the same time, many consumers report that their demand for spot goods is not strong.
At the end of July last year, the arbitrage between SHFE and LME tended to be negative. Even at the end of August, the arbitrage window finally closed. This led to a sharp drop in imports in October to more than 200,000 t, a 29.1% drop from the previous quarter, despite a rebound to nearly 280,000 t in November. At the same time, the amount of import orders in October remained at 15 to 200,000 tons, and even the number of contractual commitments remained at the lowest level. Another reason for the decrease in imports in October was the influence of the National Day holiday. However, the traditional off-season in November and December tends to increase. In the first quarter of 2011, imports are expected to increase as demand increases. At the same time, as the arbitrage trade tends to go to a negative end, it also causes the import cathode copper premium to drop to only 30-80 US dollars/t. However, it is understood that the import premium has recently turned upwards, mainly due to the purchase price premium of US$60 to US$100/t in the first quarter of 2011. In particular, Chile’s state-owned copper company reached a premium trading contract for 2011 of US$115/t.
Just before reaching an agreement with China, Cod-Corco also reached a benchmark premium with Japan and South Korea, respectively. Except for Yokohama Port of Japan, which is US$112/t, the others are comparable to European standards at US$98/t. For this reason, when the industry talked about the magnitude of Japan and South Korea’s premium, it showed that there was no reason to achieve a three-digit number because buyers could give strong and sufficient facts to keep the contract terms below this psychologically significant level.
Russia will resume the collection of 10% of export cathode copper tariffs. Russia recently announced that in the near future it will resume the export duties of 10% on cathode copper. As early as 2009, when Russia eliminated tariffs, the production and export of copper rods did not increase due to tax cuts. Instead, they both fell due to the financial crisis, but copper cathode exports rose. Therefore, it is expected that with the recovery of copper wire rod production in 2011, copper cathode consumption will increase. At present, Europe is Russia's largest export market, accounting for about two-thirds of Russia’s cathode copper and wire rod exports. However, it is understood that most of its exports to Europe have a relatively low premium, which will have an impact on the European cathode copper market. However, as the supply of scrap copper in the European market tends to increase, more European consumer sectors will slow or even stop relying on cathode copper in Russia. For this reason, the industry estimates that Russia’s restoration of taxation will not have a major impact on European consumers. As for the original growth of Russian copper rod exports, it is expected that with the restoration of export taxes, Russia’s exports to the Middle East and North Africa will face difficulties, in particular, will lead to losses in the region such as Turkish manufacturers. And with the decline in the production of copper rods will also lead to a reduction in copper cathode consumption.
The copper market will continue to fluctuate in the future. Generally, the international copper market has generally turned to a rapid rebound after a significant drop. As we have seen, after the price fell in November last year, it continued to be strong and maintained at more than 9,000 US dollars/t, and it went up to 9,500 US dollars in 2011. Especially supported by technical factors still above the middle trend line. At the same time, with the expected shortfall of the copper market in 2011, the crisis in the euro zone and the calm in the Korean peninsula, investor interest has recovered. To this end, from the analysis of the balance relationship of the copper market, the future will still face the test of rising, rather than the risk of decline.
It is understood that at the beginning of last year, consumers carefully ordered a small amount of copper according to their predictions, but as time went by, demand picked up strongly, which enhanced market confidence and gradually added orders. Although there is a clear contradiction between consumers and traders, after negotiation, they still order from the trader and make up the required copper. According to traders, consumer demand and spot trading were higher than usual in 2010. In any case, however, consumers’ purchases from traders are still relatively small, and in the unstable market environment they must be supplemental temporary losses. Because in this case to add a small amount of deficiency, the best way is to make up for it by the traders.
According to reports, there are indications that the shortage of spot copper cathode market has caused the continuous decline of copper stocks in U.S. and European LME warehouses. It is estimated that the U.S. deficit of 40,000-50,000 tons of supply and demand in 2010 is not surprising at all, and this has also caused the decline of stocks in exchanges. It is reported that during the financial crisis of 2008 and 2009, US inventories increased by 300,000 tons, of which the LME stocks reached 223,000 tons and the COMEX reached 76,000 tons. In 2010, the cancellation of warehouse receipts by the United States LME remained high, and it has been growing recently. The cancellation of the warehouse receipt symbolizes that the copper will be transferred from the exchange. From the end of last March to the end of last year, the average LME copper stocks in the United States have steadily dropped by 400 tons per day, and the inventory of comexes is also 30% lower than the high point in February last year, of which only 3,000 tons was dropped in November of last year. With the steep rise in freight costs, the US spot premium has reached 5 to 6 cents per pound. Judging from the US contract of sale in 2011, Codelco of Chile reached a premium of 0.5 cents per pound.
In Europe, the general situation is similar to that of the United States. As traders continue to release copper from the exchanges in order to meet the small-scale demand of the spot market, only in November last year, LME stocks fell by more than 5,000 tons. As a result, spot premiums increased by $5 to $10/t to $100 to $110/t, which also led to the fact that LME's actual inventory level fell to only 34,000 t, the lowest level since July 2008. In contrast, the U.S. inventory reached 265,000 t. For this reason, it is estimated that there is less room for further decline in European stocks than for the United States. However, given that the number of written-off warrants since March of last year is still only 10% of the total inventory, the pro-rata basis may still decline.
The increase in the supply of sufficient inventory in the Chinese market compared with the decline in the shortage of cathode copper supply in the United States and Europe, the Asian market, especially the Chinese market is different, and the supply of sufficient inventory has increased. Consumer inventories can generally satisfy more than two months of demand. And at the end of last year, Shanghai Stock Exchange (SHFE) copper inventories also rose to 126,736 tons, which was an increase of nearly 40,000 tons from the end of September. From October to November, it increased by 20,000 tons. At the same time, many consumers report that their demand for spot goods is not strong.
At the end of July last year, the arbitrage between SHFE and LME tended to be negative. Even at the end of August, the arbitrage window finally closed. This led to a sharp drop in imports in October to more than 200,000 t, a 29.1% drop from the previous quarter, despite a rebound to nearly 280,000 t in November. At the same time, the amount of import orders in October remained at 15 to 200,000 tons, and even the number of contractual commitments remained at the lowest level. Another reason for the decrease in imports in October was the influence of the National Day holiday. However, the traditional off-season in November and December tends to increase. In the first quarter of 2011, imports are expected to increase as demand increases. At the same time, as the arbitrage trade tends to go to a negative end, it also causes the import cathode copper premium to drop to only 30-80 US dollars/t. However, it is understood that the import premium has recently turned upwards, mainly due to the purchase price premium of US$60 to US$100/t in the first quarter of 2011. In particular, Chile’s state-owned copper company reached a premium trading contract for 2011 of US$115/t.
Just before reaching an agreement with China, Cod-Corco also reached a benchmark premium with Japan and South Korea, respectively. Except for Yokohama Port of Japan, which is US$112/t, the others are comparable to European standards at US$98/t. For this reason, when the industry talked about the magnitude of Japan and South Korea’s premium, it showed that there was no reason to achieve a three-digit number because buyers could give strong and sufficient facts to keep the contract terms below this psychologically significant level.
Russia will resume the collection of 10% of export cathode copper tariffs. Russia recently announced that in the near future it will resume the export duties of 10% on cathode copper. As early as 2009, when Russia eliminated tariffs, the production and export of copper rods did not increase due to tax cuts. Instead, they both fell due to the financial crisis, but copper cathode exports rose. Therefore, it is expected that with the recovery of copper wire rod production in 2011, copper cathode consumption will increase. At present, Europe is Russia's largest export market, accounting for about two-thirds of Russia’s cathode copper and wire rod exports. However, it is understood that most of its exports to Europe have a relatively low premium, which will have an impact on the European cathode copper market. However, as the supply of scrap copper in the European market tends to increase, more European consumer sectors will slow or even stop relying on cathode copper in Russia. For this reason, the industry estimates that Russia’s restoration of taxation will not have a major impact on European consumers. As for the original growth of Russian copper rod exports, it is expected that with the restoration of export taxes, Russia’s exports to the Middle East and North Africa will face difficulties, in particular, will lead to losses in the region such as Turkish manufacturers. And with the decline in the production of copper rods will also lead to a reduction in copper cathode consumption.
The copper market will continue to fluctuate in the future. Generally, the international copper market has generally turned to a rapid rebound after a significant drop. As we have seen, after the price fell in November last year, it continued to be strong and maintained at more than 9,000 US dollars/t, and it went up to 9,500 US dollars in 2011. Especially supported by technical factors still above the middle trend line. At the same time, with the expected shortfall of the copper market in 2011, the crisis in the euro zone and the calm in the Korean peninsula, investor interest has recovered. To this end, from the analysis of the balance relationship of the copper market, the future will still face the test of rising, rather than the risk of decline.
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