By Ibrahim Patel
In the wake of production cuts imposed by Copper mines around the World, supply has been reduced tremendously. On the other side, China has indicated to take further reform measures for economic growth. Due to result of both these factors, among optimism copper prices have rebounded by around 10 per cent. The price of three-month futures copper on the London Metal Exchange slumped to a five-year low of $5,340 in January, and dipped below $6,000 again this week, which was quoted on Thursday at $ 5910.
While the metal has rallied, it remains below $6,500 a ton, around the level China’s scrap imports began falling in the beginning of the fourth quarter of last year. Copper prices may find support from China’s scrap imports falling to the lowest in six years during the first quarter as fabricators are forced to rely more on refined metal. Copper prices may rise for a fifth straight week in London, New York and Shanghai exchanges as growing demand in China and the U.S. erodes inventories amid a strike at Phelps Dodge Corp.'s El Abra mine in Chile. The copper industry is faced with a dilemma as debate intensifies over when the price of the metal will start to recover.
This became talk of the town everywhere in the industry. Because of low level of pricing, the persons who are funding and investing in copper are keeping distance. Some mines have postponed their pre-plans. Some miners are focusing their attention to get more productivity from their workers with the cost-cutting measures. The world’s largest miners, from Chile’s Codelco to Rio Tinto, do not predict copper demand to exceed supply until at least 2018, after which they forecast growing deficits. Citigroup, however, says that could come sooner, in 2016, as the pipeline of new projects empties.
According to them, if there is the price rise in the near future may start, this is the right time to invest in new projects. Other analysts say that China used Copper imports fell 11 per cent in the first quarter and reached to the level of 781198 tons. China relies on used copper for about one third of its refined metal feedstock, with 60 percent of that supply coming from overseas, according to the International Copper Study Group.
Currently refined copper prices are low and due to weak demand there is shortage of Copper in the world over. Thus the difference between the price of scrap and refined copper has become small. It can be said that until refined copper price could rise to the level of $ 6600, China's scrap imports may not possible. According to Sims Metal Management Asia Limited, the world's largest metals and electronics recycler, last year, China's copper scrap import was the lowest since 2004.
Due to fairly tight supply of scrap in United States, there is no possibility to rise in scrap import from China. Global supply of used copper will remain tight until at least the second half of the year, when potentially higher refined prices encourage more scrap collection and supply, according to Standard Chartered. The reduced availability of scrap may erode an expected 86,000-ton surplus of the metal this year, the bank said.
[Courtesy - www.commoditydna.com]
Ibrahim Patel is well-experienced commodity & currency expert. He has writing experience in the field since 35 years. He is working in Sandesh Gujarati newspaper and also editor of www.commoditydna.com. He had vast experience in analysis of trends in comodity markets in Vyapar, a commercial newspaper from Mumbai.[/vc_column_text][/vc_column][/vc_row]