Better perspectives in copper supply
World’s major miners believe that copper market will be considerably better supplied in the mid-term than a year ago.
This positive view is due to a strong demand trend and the fact that copper companies think that new mines are needed. Those able to develop these new projects will increase volumes, profit and revenues. Therefore, the high copper prices in 2017-2018 have also encouraged few companies to invest in new copper projects. This new production will lead to an expected 900’000 tons a year more copper supply around 2020 than today.
It is forecasted that the copper deficit will shrunk from 600’000 tons to 200’000 tons. A slowdown in the demand growth is expected in the coming years from 2,5% to 1,9% of growth per year.
We also have to keep in mind that the global outlook is strongly influenced by China even though is rate of growth is declining. Furthermore, its economy is changing to an industry growing economy which demand a lot of copper supply to a consumption-based economy which has a lower demand.
Copper producers must nevertheless keep an eye on the market and introduce flexibility into their new project to ensure maximum profitability. Indeed, the slowdown in demand from the developed countries and the speed at which China demand slows remain uncertain and could affect producers’ new projects.
MMG Ltd plans after tax hike in Congo
After Glencore and ERG another foreign miner is reviewing its future production plans after the government increased taxes and removed investors safeguards.
MMG Ltd which is a Chinese state-owned enterprise is considering to invest in more expensive methods of mining the metal when existing oxide resources are exhausted.
Congo ranks alongside the United States as the world’s fourth biggest cooper producer and the largest source of cobalt. A supply change in Congo could have the potential to impact the cooper and cobalt prices, which have declined in the past due to that trade war between the U.S and China.
Forward curves
Current
Current
By comparing 2 forward curves below, we can notice some changes in the copper market. In the previous curve, the market was in the backwardation from march to April, meaning that the there was an undersupply situation. In the current curve, we are in contango. The market turns from a bullish to bearish market to an oversupply situation.
Spot Price
We can see a drop in the copper price during the month of February probably due to the Chinese New Year. Prices start to rise again on March as Chinese demand restart as well as the economic growth. The copper market is still undersupply which add even more pressure on prices.
Copper futures forward curve. MarketQview(online). 28thMarch 2019. (Consulted on 31th March 2019).
Available at the URL:http://marketqview.com/forwardcurvechart.php?ID=18&TYPE=Price
https://www.ft.com/content/2d2eef1e-5187-11e9-9c76-bf4a0ce37d49
Global copper market under supplied, demand on the rise — report (online). (Consulted on the 2nd April 2019)
URL:http://www.mining.com/global-copper-market-supplied-demand-rise-report/ Futures Forward Curve (online). (Consulted on the 2nd April 2019)
URL: http://marketqview.com/forwardcurvechart.php?ID=18&TYPE=Price https://markets.businessinsider.com/commodities/copper-price MMG Joins Glencore, ERG Reviewing Congo Plans After Tax Hike (Consulted on the 2nd April 2019) https://www.bloomberg.com/news/articles/2019-04-03/mmg-joins-glencore-erg-in-reviewing-congo-plans-after-tax-hike