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Lack of mine supply growth highlighted by Copper Study Group – Mr Andy Home

Metal News - Published on Tue, 21 May 2019

Image Source: Zawya
Reuters reported that refined copper market will experience supply shortfalls both this year and next, the International Copper Study Group says. The group has in fact lifted its 2019 deficit assessment to 189,000 tonnes from a forecast 65,000 tonnes at its last biannual meeting in October 2018. Next year’s deficit is expected to be wider at 250,000 tonnes. These are still marginal numbers given the size of the global copper market - 25 million tonnes - and prey both to statistical error and a highly changeable macroeconomic backdrop. The rate of demand growth is a key variable and one that is very much to the fore as copper and other industrial metal markets eye nervously slowing global manufacturing activity and trade tensions between the United States and China.

Supply, by contrast, is more knowable and the key takeaway from the ICSG’s latest forecasts is the marked lack of new mine supply expected over the next year and a half.

The ICSG is expecting mine supply to be “essentially unchanged” this year, up just 0.2% at 20.64 million tonnes.

The world’s copper mines churned out 2.5% more metal last year thanks to what was by copper’s standards an unusually low rate of disruption.

The ICSG’s forecasts include a “disruption allowance” and 2019 is shaping up to be a more normal year with several major producers already slicing production guidance during the first-quarter reporting season.

Extra supply will come from the new Cobre de Panama mine and the expansion of the Toquepala mine in Peru.

But the impact will be offset by falling output at the giant Grasberg mine in Indonesia as it moves from open-pit to underground operations and the expected negative impact on Zambian production from what the ICSG terms “regulatory/tax issues”.

Improved output from Grasberg in 2020 is the main reason for an expected 1.9% increase in mine production next year, also allowing for potential disruptions. It’s a subdued growth outlook, particularly given it will follow this year’s complete dearth of extra production.

Others, by the way, don’t think that global mine supply will grow at all this year.

The International Wrought Copper Council last month released its own copper market assessment, including a forecast that mine supply would actually fall by 2%, albeit with an expected slightly stronger 2.2% recovery next year.

This lack of mine growth isn’t doing much to support the copper price. London copper has been sliding since the start of the month, hitting a four-month low of USD 6,007.50 per tonne on Monday.

But it’s clear to see in the raw materials segment of the market in the form of tumbling treatment and refining charges.

The charges for converting mined concentrates into refined metal are a sensitive gauge of raw material availability, falling during times of shortage and rising during times of plenty.

The China Smelters Purchase Team a grouping of some of the largest copper processors in the largest copper processing country, slashed their concentrates purchase floor price by 20% for the second quarter.

The minimum smelting charge of USD 73 per tonne and refining charge of 7.3 cents a pound is the lowest quarterly outcome since at least 2015 and below the annual 2019 benchmark terms of USD 80.8 and 8.08 respectively.

A tightening concentrates market reflects both the lack of mine growth and increased competition for raw materials within China.

New smelting-refining capacity is coming on stream, injecting an extra demand boost for copper concentrates.

China’s concentrate imports have been running at a record pace so far this year. Cumulative imports totalled 7.24 million tonnes (bulk weight) in January-April, up 17% on last year’s record flows.

Chinese smelters have evidently run the same mine supply numbers as everyone else and are building a stocks cushion in anticipation of the expected concentrates squeeze.

Source :

Posted By : Rabi Wangkhem on Tue, 21 May 2019
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