Copper prices fall as energy crisis raises doubts
The Monthly Copper Metals Index (MMI) fell 1.7% as copper demand could weaken and spot prices for the three-month LME and Chinese primary fell month-over-month.
The Fed Effect and Congressional Delays
As the Federal Reserve prepares to scale back its pandemic strategy, copper prices have fallen. The Fed said it would hike rates and cut back on the asset purchase program (i.e. quantitative easing).
This news benefited the US dollar, which has appreciated over the past month. This is particularly important for copper. The US dollar and commodities have historically moved in a perfect inverse relationship.
Additionally, congressional decisions – or the lack of them – could cause market turbulence and impact copper prices. The bipartite infrastructure deal remains delayed in the House of Representatives. Congress has not taken action to raise the debt ceiling, adding to the potential market turmoil, although Republicans appear to have agreed to short-term debt ceiling coverage until December. .
China on prices
Meanwhile, the world’s second-largest economy continues to show signs of volatility.
China is the largest consumer and producer of refined copper. Its latest issue is about an electricity crisis that has affected both copper production and manufacturing. Both have experienced restrictions.
Most of China’s energy comes from coal. As the supply fell below the required levels, it therefore experienced unprecedented price levels. Several provinces experienced limited power consumption. As a result, manufacturers cut off the electricity and shut down the production of goods. Some expect these closures to affect the availability of consumer goods in the United States.
The results can be seen in the Caixin indices for August and September, which were 49.2 and 50.0 respectively. Values below 50 represent a contraction in factory activity.
In addition, concerns about the Chinese real estate developer that of Evergrande the financial situation continues to weigh heavily on demand. The future of the construction industry in China, a heavy consumer of copper, remains unknown.
CTs are increasing
The slowing demand for copper has helped smelters.
China copper smelters increased their copper concentrate processing and refining costs (TC / RCs) for the fourth quarter to $ 70 / t and $ 0.07 / lb, Argus reported. This increase comes after TC / RC remained low for most of the year.
The increase means that copper concentrate appears to be widely available, potentially due to declining demand and after wage contracts in Chile have been settled.
This increase also comes at a time when foundries are being asked to reduce their production. Nanguo’s 300,000 metric ton per year smelter and Guorun 100,000 metric ton per year smelter suspended operations in mid-July and late July, respectively, and remained so until this month. here, instead of being faced with a simple initial 55-day suspension.
Real metal prices and trends
The LME three-month copper price fell 2.3% month-over-month to $ 9,101 per metric tonne on October 1.
Chinese primary spot copper fell 0.9% to $ 10,678 per metric tonne. Likewise, Chinese copper scrap rose less than 0.1% to $ 9,846 per metric tonne.
The grades of US copper producers 110 and 122 fell 3.3% to $ 4.9 per pound. Producer grade 102 declined 3.2% to $ 5.1 per pound.
By AG Metal Miner
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