By Jim Williams
The price of copper continued its upward swing – even though only slightly – to start out the week. Experts say the positive movement is a result of an increase in industrial production in China. Sentiment rose last week after Premier Li Keqiang said Beijing is confident it will hit its growth target of 7.5% this year.
The news eased some concerns that demand from the world’s largest metals user will decline, especially in light of last week’s news of alleged irregularities at Qingdao Port.
“Prices are tending slightly firmer this morning as the Chinese prod their domestic growth with sporadic stimulus measures,” states Michael Turek, head of metals at NewEdge in his daily briefing. “The market looks as though it is trying to consolidate in the wake of the latest ownership scandals and nearby tightness particularly in copper should prove supportive. “
Last week’s bombshell allegations of double- or triple-pledged metals is still making headlines.
Thousands of tonnes of “invisible” copper being ushered out of some Chinese warehouses may remain out of sight for months longer, as banks and traders seeking safer placed for their metal opt out of the London Metal Exchange network. The fear of fraudulent financing at some storage depots in Qingdao port has prompted some banks and merchants to cut credit for financing deals or relocate metal to better-known warehousing firms.
The Hongkong and Shanghai Banking Corporation (HSBC) is now examining all commodities financing transactions. “We continue to provide commodities financing support to our customers,” an HSBC spokeswoman told the South China Morning Post. “Recognizing the uncertainty of the situation in Qingdao, we are thoroughly assessing each transaction on its own merit.”
Despite the disaster in Qingdau, Chinese factory output closed last week up 8.8 percent in May from a year earlier, up from 8.7 percent in April. Copper’s minimal gain reduced this year’s losses to 9.3 percent, still the steepest drop on the LME.
You may wonder why we cover China so much when talking about the price of copper. The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year. But, the largest provider of the red metal is Chile. The South American nation produces about a third of the global supply of copper, a key raw material for construction and power that is vital for industrialization. With consumption rising 4 percent yearly, the country’s output growth is not enough to meet additional demand.
Could the United States step in and be a factor in the demand for copper? Mining.com reports mining for copper and iron ore may make a comeback in the Upper Midwest. The article states there are at least six mines proposed or already started near Michigan, Minnesota and Wisconsin.
Another article on mining.com says we will find out this week if New Zealand will allow underwater mining on the ocean floor. The project proposes mining for iron ore, but if approved, it could encourage others looking to mine copper, cobalt, manganese and other metals to pursue mining underwater as well.
We will keep an eye on all of the trends and report them as they impact our industry and the price of copper.
In Other Related News
Markets continue to monitor developments in Iraq, where the conflict between radical Sunni insurgents and Shiite Iraqi soldiers continued over the weekend.
Investors are also cautious ahead of the outcome of the upcoming Federal Reserve policy meeting on Wednesday, as they await fresh indications on the timing of possible interest rates increases.tED