European refined copper market participants pessimistic outlook: LME Week

Participants from across Europe’s copper industry will meet in London on Monday October 9. The timing of the event means negotiations and announcements relating to long-term contracts are often a focal point of discussions.

With demand in Europe very weak, however, participants are approaching LME Week in a mellow mood. “Nothing has changed in the last few weeks,” a trader said. “There is enough material, and no one is thinking about buying more,” they added.

Some participants had expected, or hoped at least, for a slight uptick in demand after the summer in the Northern Hemisphere – but this did not happen, they said.

“[The] post-summer [period] has been worse than expected,” the trader said. A second trader shared a similar view, saying that “summer is over, and demand is still not great.”

Multiple traders and consumers told Fastmarkets that the copper market in Europe was very weak. The first trader said they couldn’t remember weaker demand since the aftermath of the collapse of Lehman Brothers in 2008.

“We have an issue here, the business environment is just really weak, it feels like a recession,” a third trader said.

One consumer source went so far as to say that if the European supply picture hadn’t been impacted by challenges, for example the fire at Boliden’s Rönnskär smelter, the effects of the weak demand could have been disastrous.

The higher end of the copper grade A cathode premium, delivered Germany assessment reached as high as $260 per tonne in February, but it has come under pressure and has since fallen to $200 per tonne on September 19.

Sources said that the market is so weak that they could not see demand picking up soon.

“If I try and take an optimistic view, hopefully the market will recover by the second half of 2024,” the third trader said, adding they were certain that the start of 2024 would be weak.

They also said, however, that they were coming “to the sense and belief that 2024 will [also] be weak.”

Participants noted the market was under pressure from high financing costs and a weak economic picture that has been heavily impacting demand from the construction sector – a large copper consumer in Europe.

High-interest rates, sources said, were also pressuring traders who faced increasing costs in the past year. None of the sources Fastmarkets spoke to expected high borrowing to change any time soon. The recent meeting of the US Federal Reserve indicated that interest rates will stay higher for longer, meaning a change in this scenario is unlikely to come soon, they said.

Sources also noted other weak macro factors, for example, a slower-than-expected economic recovery in China, were dampening the mood in the European copper market.

Moreover, market participants were divided on whether long-term demand will be strong. Some sources said that copper’s intense usage in electrical grids and renewable energy means demand for the metal will increase in the coming years.

“I am pretty sure copper demand will increase significantly by the end of the decade… but it is far off,” the third trader said.

Participants said that with LME Week fast approaching, the market was waiting to take queues from the event.

“The market is very stable and quiet. People are just waiting for LME Week,” a fourth trader said.