In line with CRU’s expectations, prices rebounded in June following a predominantly macro-driven decline in the previous month – diverging views over China’s copper demand strength was another factor causing volatility. Indeed, as the situation with the U.S. debt ceiling was resolved, COMEX copper first position rose, trading in the $3.70-3.90 ¢/lb range in the first half of June. 

Since June 23, copper prices have come under pressure, in part as the U.S. dollar regained some of the strength it lost earlier in the month, but also due to the prospect of interest rate increases in major economic blocks. This is because, in a recent gathering of central bankers, the Fed, ECB, and Bank of England signalled that further rate hikes might be needed to keep inflation under control. A resilient jobs market in the U.S. and elsewhere reinforce these expectations. These factors were enough to wipe away most of the price gains from earlier in June.

The breakdown of positioning in the Commitment of Trader Reports (CoTR) on COMEX shows sentiment improved throughout June, with positioning evolving from 35,000 lot net short late May to 2,940 lot net long a month later. The now balanced position is reflective of an uncertain outlook, with sticky inflation and subsequent higher interest rates posing downside risks whilst possible stimulus in China gives room on the upside.

  Back to Top

China remains a big topic of discussion due to the disconnect between the macro picture of the broader economy and the microenvironment of the copper market. This disconnect continues to lead to diverging views among market participants depending on the metrics they prioritise. Those who focus on headline macro indicators maintain a more pessimistic view on the recovery of demand post pandemic that is also shaping their copper market view. 

But focusing on market data, our view is that underlying demand for copper has been robust. Apparent consumption, which is calculated by adding net imports to domestic production, was estimated to have grown by 4.8% in the year-to-May, up from 3.5% in the year-to-April due to strong 13.6% growth for May itself. While a robust apparent consumption estimate does not necessarily mean that underlying demand is equally strong, there is no sense of any significant accumulation of inventory across the supply chain. With strong demand from the power grid, EV, renewables, and AC sectors, semi-fabricators utilisation rates were consistently over 80% from late March up to mid-June.

That being said, the season that typically has the highest demand is drawing to a close, and China’s copper demand has begun to weaken. Furthermore, semi-fabricators are taking a wait-and-see approach to ordering cathode due to relatively high SHFE copper prices, as most of them are expecting prices to fall with weakening copper demand. 

Bonded stocks continue to drop due to moving cathode out of bonded warehouses after the arbitrage window was open at the end of May. The arbitrage window reopened on Thursday, June 29 and contributed to a further decline in bonded stocks. We expect bonded stocks will keep decreasing in the following weeks as more outflows will occur. We estimate total visible copper stocks in China reached 133,495 t, down by 45,460 t in the last three weeks.

  Back to Top

In the U.S., cathode demand has continued to decline m/m in June, with the seasonal summer slowdown seemingly arriving prematurely. Currently, demand for cathode is soft, partly due to consumers holding inventory. Nevertheless, given high interest rates, it is more painful to hold stocks. A soft demand environment coupled with an uncertain outlook also provides little incentive to do so. There are rumours of consumers destocking and, in some cases, trying to sell material back to the market. In terms of end-use demand, EVs are said to be a bright spot.

While in Europe, the situation is similar, Q2 demand remains disappointing, order books are weak with consumers acting on a hand-to-mouth basis. Soft demand is being felt across nearly all sectors, with the exception of demand related to the green energy transition (GET) and wider energy infrastructure. 

With regards to inventories, overall COMEX warehouse stock levels saw an incremental increase in June, rising from 27,702 t at the start of the month to 33,929 t on June 29. Overall, copper stocks on global exchanges continued to fall throughout May and June reaching 172,007 t on June 30.

  Back to Top

Boliden’s Rönnskär smelter/refinery, located in Sweden, declared force majeure after a cell house fire on June 13. Boliden have since noted the electrolytic refinery had been completely destroyed in the incident. Around 220,000 t/y of refined metal output, equal to 9% of Europe ex-Russia production, is offline as a result. Boliden has partially resumed output of anode and all production lines, aside from the electrolytic refinery, will be operational again during July. Yet, it is unclear where the blister / anode will be sent for refining.

In South America, Chile experienced heavy rainfall in mid-June, which reportedly led to Codelco temporarily halting production at its Andina and El Teniente open-cut mines. However, we understand production resumed within two days. Similarly, snow at Anglo American’s Los Bronces has not impacted production at this stage. Our analysis of electricity usage at key mines in Peru indicates relatively stable production in June, following the impact of community protests in Q1.

  Back to Top

We expect that copper prices will trade rangebound in Q3. In a relatively balanced market and with good availability of material, it will be macroeconomic developments that continue to dictate short-term price movements.

  Back to Top

• Copper Insights: April 2023
• Copper Insights: March 2023
• Copper Insights: November 2022
• Copper Insights: August 2022
• Copper Insights: April 2022
• Copper Insights: January 2022

The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by CRU International. CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.

CME GROUP DOES NOT REPRESENT THAT ANY MATERIAL OR INFORMATION CONTAINED HEREIN IS APPROPRIATE FOR USE OR PERMITTED IN ANY JURISDICTION OR COUNTRY WHERE SUCH USE OR DISTRIBUTION WOULD BE CONTRARY TO ANY APPLICABLE LAW OR REGULATION.