External factors buoy copper price

The price of copper began to climb in March, and the momentum continued through much of April, with the price retracting somewhat following Iran’s missile attack on Israel. However, one analyst said we could see lower pricing at the end of the second quarter despite tightness in the market.

Edward Meir of New York-based Marex, a diversified global financial services platform, speaking during the Spotlight on Copper at the Institute of Scrap Recycling Industries (which has been renamed to the Recycled Materials Association, or ReMA) 2024 Convention & Exhibition in Las Vegas in mid-April, said pricing climbed recently in response to news that the London Metal Exchange (LME) and Chicago Mercantile Exchange (Comex) banned the exchange of Russian metals in response to restrictions the U.S. Department of the Treasury and its U.K. counterpart, HM Treasury, announced on the trading of Russian aluminum, copper and nickel.

Meir said the reaction was “overdone” given the relatively small amount of Russian copper on the LME.

“Things look tight in copper. We earlier had expectations of a 300,000-to-500,000-ton surplus in copper for this year. That estimate has been cut in half.” – Edward Meir of Marex

He said copper pricing was climbing before these events because of developments coming out of China. “I refer to the fact that 15 Chinese smelters announced that they will be cutting their refined production,” Meir continued. “In other words, they said they’re not going to keep producing any refined cathodes because their treatment charges have collapsed and it’s just not profitable for them to do so.”

ReMA Chief Economist Joe Pickard said China has been the major driver of copper price developments. Its imports of recycled copper and copper alloys from the U.S. increased 49.2 percent in the first two months of this year to 69,792 metric tons compared with 46,772 metric tons in the same period in 2023, making China the largest importer of this material. The second-largest importer is Canada at 14,300 metric tons for the first two months of this year.

While Marex initially forecasted copper would be in a surplus this year, Meir said “things look tight” as of April. “We earlier had expectations of a 300,000-to-500,000-ton surplus in copper for this year,” he continued. “That estimate has been cut in half.”

Marex sees “a mostly balanced market” this year, with tightness in concentrates but not on cathodes.

“If this supply shortage is in fact real, we’re going to start to see these two markets kind of converge,” Meir said. “Spreads will need to come in, scrap discounts will need to narrow, inventories will have to fall, especially in China, and treatment charges, which are already very low, I think will go to negative territory, so smelters will pay to get more of it.”

If this doesn’t occur, Meir said demand would be the issue. “Demand is offsetting the tightness we’re seeing on the supply side. And the demand weakness could come from China if their economy continues to contract. It could also be generated by a slowdown in global manufacturing, especially now that interest rates seem to be stickier.”