Strong­est Global Man­u­fac­tur­ing Ac­tiv­ity since 2008 Fi­nan­cial Cri­sis gives Com­modi­ties a boost in 2018....

Zambian Business Times - - FRONT PAGE -

COP­PER the red me­tal used in wire and bul­lets man­u­fac­ture is trend­ing bullish af­ter the me­tal mar­kets priced – in data about a 94% de­cline in cop­per scrap im­ports as per Me­tal­bul­letin re­port re­leased this week. It was ru­moured last year that that China would in­tro­duce reg­u­la­tion that would ban the im­por­ta­tion of scrap me­tal. This meant that that de­mand for fresh cop­per would rise sharply.

Me­tal­bul­letin re­ports that Bei­jing cut its quota for the first two batches of 2018 cop­per scrap im­ports to 136kt, down a whop­ping 94.3% com­pared to 2017. The mar­ket data provider said not only were far fewer re­fin­ers ap­ply­ing for li­cences, but those that did saw al­lo­ca­tions drop more than 80% be­low last year's lev­els. An­other in­di­ca­tion of tight sup­ply came a fort­night ago af­ter China's cop­per smelters low­ered their treat­ment and re­fin­ing charges

An­other in­di­ca­tion of tight sup­ply came last week af­ter China's cop­per smelters low­ered their treat­ment and re­fin­ing charges ( TC/RCs) in the first quar­ter of 2018 by 8.4%. The 10-mem­ber China Smelters Pur­chase Team (CSPT) set the min­i­mum level for treat­ment fees at $87 per tonne. Ear­lier China's Tongling Non­fer­rous Me­tals Group had agreed with num­ber one listed cop­per pro­ducer Freeport-McMoRan to set the 2018 bench­mark at $82.25 per tonne, an 11% drop from the 2017 bench­marks.

Cop­per gained 30% in 2017 as it con­tin­ues to re­cover from six-year lows struck early last year and ex­pec­ta­tions are for a pos­i­tive if more mod­est per­for­mance next year. Mea­sured from its multi-year lows struck at the be­gin­ning of 2016, cop­per has gained more than 70% in value.

The red me­tal's run started on hopes (since dashed) of mas­sive in­fra­struc­ture in­vest­ment in the US fol­low­ing the pres­i­den­tial elec­tion, but strikes in Q1, which at one point saw nearly a tenth of global pro­duc­tion go off­line, re­ally set the tone for the year. By mid-year the rally was flag­ging, but talk of a Chi­nese ban on scrap im­ports saw the price take off again.

Cop­per closed Fri­day last week’s trad­ing ses­sion at $7,188/ton on the Lon­don Me­tal Ex­change - LME

De­spite the rally, com­modi­ties prices are though also ben­e­fit­ing from less-friendly sup­ply con­straints, no­tably the re­duc­tion in oil sup­ply or­ches­trated by Saudi Ara­bia and Rus­sia. In cop­per, in­vestors worry that wage ne­go­ti­a­tions in Chile, the world’s largest pro­ducer of the red me­tal, could dis­rupt min­ing ac­tiv­ity. And freez­ing weather in the U.S., the world’s top pro­ducer of agri­cul­tural com­modi­ties, is help­ing to in­crease the price of wheat and other grains.

On the flip side, the rally could sow the seeds of its own de­struc­tion as pro­duc­ers such as shale oil com­pa­nies bring­ing ex­tra sup­plies to cash-in higher prices.

“Ris­ing U.S. pro­duc­tion on the back of higher prices could keep prices range-bound even though de­mand for oil is ris­ing,” said Michael McDonough, chief econ­o­mist at Bloomberg Eco­nomics.

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