Glencore cuts 2019 copper production market as has been lowered following severe flooding in Australia and also due to security failure that led to a 7 percent drop in production for the 1st quarter.
Furthermore, the mining sector has been worried and under pressure due to his exposure to environmental and political risk. The presence in countries viewed as high risk like Democratic Republic of Congo, might damage the company reputation.
Indeed, Glencore’s Katanga Mining unit which produce copper and cobalt in the Democratic Republic of Congo had to stop is production after detecting radiation and Glencore had to install a plant in order to remove the contamination. The Katanga Mining Unit just restarted.
Copper market still undersupply:
Rio Tinto has discovered a potential mine of copper-gold-silver in Winu in Australia. This is a potential boost for the company growth. If it is not a Tier 1 asset, Rio Tinto will move to another exploration project.
Even though the new projects, Rio Tinto believe that the cooper market will go into a deficit as electric vehicle boom and bigger power grids will boost demand while supplies will remain constrained.
However, analysts at CRU (commodity research unit), think that thanks to major mining projects like Anglo’s Quellaveco, Teck’s Quebrada Balance and many others, the copper market will be in a small surplus market and it will go short in 2023.
Trade news:
Despite price drop , copper still created desire. Indeed, the electric car and renewable energies have revived interest in this metal. An electric vehicle contains four times more copper than a conventional vehicle. Wind and solar power generation also requires a lot of copper. Several transactions have been announced in recent weeks by giants in the sector. BHP, the world’s leading mining group has acquired an interest in an exploration company, SolGold which has one of the most promising projects in the sector today. China’s number three copper miner, Zijin Mining, has taken over Serbia’s largest mine. Anglo American had previously chosen to launch a $5 billion mining project in Peru.
Futures Forward Curves
previous
Current
By comparing 2 forward curves above, we can notice some changes in the copper market. In the previous curve, the market was in the contango directly from April, meaning that the there was an oversupply situation. In the current curve, we are in backwardation. The market turns from a bearish to bullish market to an undersupply situation.
http://marketqview.com/forwardcurvechart.php?ID=18&TYPE=Price