Copper Prices show strong increase after demand rush from China

Copper hit the psychologically important $ 3 per pound mark again on Thursday, due to falling inventories, booming Chinese demand and pandemic-stricken supply from South America, the US and Africa. Copper for December delivery traded on the Comex in New York for $ 3.0120 a pound ($ 6,605 per ton) in morning trading, translating into over profit since the COVID-19 low in March 2020 8 percent and a whopping 52 percent. A new report from Roskill suggests the copper rally - which has surprised many with its speed - has to go further. Jonathan Barnes, associate consultant on copper at the London-based metals and minerals research firm, says that while the effects of COVID-19 could reduce global consumption of the metal by 3 to 4 percent this year, the decline in mine production and However, the scrap stream was greater. The effect of this is most evident in the decline in inventory levels around the world. Total visible inventories worldwide, including those on stock exchanges and bonded warehouses in China, fell 40 percent from March to the end of July to less than 600,000 tons. The stocks in the LME warehouses are at 13-year lows. China is responsible for more than half of the world's copper consumption, and the country is sucking up copper at a record-breaking pace. "China is importing more refined metal from almost all countries, which indicates a structural shift rather than a temporary change," says Barnes. "If you're looking for signs of panic buying, you can find evidence of this in China - total Chinese supplies are less than two weeks of consumption at current usage rates." In the rest of the world, where demand has fallen much more sharply compared to China, stocks only correspond to one week's consumption. The shortage of available scrap - imports were down 50% in the first half - after Beijing delayed new import regulations, has forced Chinese buyers to replace secondary sources with a cathode, further reducing visible inventories. Roskill estimates that around 300,000 tons of secondary material - scrap, ingots and granules - cannot be imported into China from January to July. Barnes believes global scrap flows may not normalize until the first quarter of next year, but would depend on new rules in China. Barnes says Roskill's sources couldn't confirm that China's State Reserve Bureau bought strategic copper stocks, "but if they had, they likely would have done so sooner, when prices were much lower."