Bearish investors hinder near-term copper, but outlook still strong, Codelco chair says: LME Week | Hotter Commodities
The short-term outlook for copper is being understandably muted by investors’ macroeconomic and geopolitical concerns despite an ongoing positive story for the longer term, the chairman of Chilean state-owned copper producer Codelco said in an interview
Speaking in London on Friday, October 6 ahead of the annual LME Week, Máximo Pacheco told Fastmarkets that copper’s role as a financial asset was resulting in speculative investors stepping back as they took a more bearish view on the broader world outlook.
“It’s important to remember that as well as being an industrial metal, copper today is a very mature market in terms of its depth and size and has become an important financial asset,” he said.
“What’s happening to the price in the short term, to me, is more related to the economic outlook, to the perception of uncertainties related to Covid, to the war in Ukraine, to geopolitics including the US-China relationship and to other factors related to the economy,” he added.
Pacheco maintained that in the longer term, the supply-demand outlook provided very strong prospects for copper, citing the metal’s role in the energy transition, including in renewable energy and electromobility.
“The key question is, where is it that copper will come from? And we don’t still have an answer to that,” he said.
The company is in the midst of negotiating its 2024 copper premiums with its customers. Its annual offer, along with the figure negotiated by German copper producer Aurubis, is generally regarded as the cathode trading benchmark by the industry.
Pacheco said the company expects to make an announcement on its 2024 premiums on Monday, October 9.
On October 5, Aurubis told its European clients that it was maintaining a premium of $228 per tonne for 2024.
This was broadly expected by participants across the industry despite weak demand and comes as the closure of Boliden’s Rönnskär smelter in northern Sweden since June following a fire continues to trim available supply in the region.
Fastmarkets’ fortnightly assessment of the copper grade A cathode premium, delivered Germany was $180-200 per tonne on Tuesday, October 3, flat since August 22.
Fastmarkets’ fortnightly assessment of the copper grade A cathode premium, cif Rotterdam was $110-130 per tonne on Tuesday, unchanged since July 11.
Fastmarkets’ fortnightly assessment of the copper grade A cathode premium, cif Leghorn was $130-150 per tonne on Tuesday, unchanged since May 16.
“The number one question is, do we need what we produce? Is there a demand for what we produce? And the answer to that is very clear – yes, the world needs more copper, and the copper needs to be produced in countries like Chile, where we have reserves and the resources,” Pacheco said.
At the same time, he remained positive on the outlook in China, where concern over faltering macroeconomic growth and an overheated property market continue to temper expectations for consumption.
Pacheco said copper demand in China will grow by 8%, and that he expected this kind of consumption to remain amid the country’s commitment to reducing emissions and developing renewable energy and electric vehicles.
“So clearly, a strong market in China is something that we can count on,” he added.