Copper was languishing at this time of the year in 2020. The price had slumped to $1.9628 per pound when the pandemic escalated and nations announced lockdowns and other preventive measures. Fast forward to April 2021 and copper has emerged as one of the bullish assets in the commodity markets. The prices have skyrocketed with each succeeding month and now stand on the threshold of another breakaway trend. At the time of this article, the price has jumped to $4.3715 per pound, an increase of 122.72% from just over a year ago. The price is the highest since August 2011.
Strong macro and fundamental factors coupled with economic recovery in the top consumer, China are the major reasons for the resurgence of copper into the commodity market limelight. The falling US Dollar, instigating cheaper metals for holders of other currencies, remains the catalyst coupled with a bright demand outlook from the green energy sector. The global stock markets hitting record highs and investors upbeat about the prospects for a global economic recovery from the pandemic have lead traders to fashion a bullish rally in copper.
Soaring Chinese Copper Imports
In a report issued by the General Administration of Customs, copper imports of China inclined by 25% from a year earlier. The reasons attributed were increase in demand for the metal along with resolving logistics issues. As per the report, the arrival of unwrought copper and products totaled 552,317 tonnes in March 2021. The number had increased by 110,391 tonnes from the previous report of February 2021 when the economy had slowly started to recover from the pandemic and was also up by 34.70% from a 13-month low of 410,040 tonnes in February 2021.
The world’s largest consumer of copper is China. The manufacturing activities expanded at a faster rate in March after a dovish period during the Lunar New Year celebrations. According to Reuters data, copper imports in the Q1 2021 totaled 1.44 million tonnes which was 11.9% and the highest first-quarter figure recorded since 2008. As per analysts, the increment followed the squaring off of pandemic-inflicted shortages in international marine logistics capacity and the driving demand. Copper demand in China is exponentially growing as problems overseas are not fully recovered and numerous overseas orders have now been shifted to China for processing and production.
The March imports of copper concentrate or partially processed copper ore were 2.17 million tonnes. The number was the highest on record. The import figure was also up by 22% from 1.779 million tonnes in comparison to March 2020 and up by 20.5% from 1.8 million tonnes in February 2021. Reuters data also showed that in the first three months, the shipment of copper concentrate had inclined by 7.4% vis-à-vis March 2020 with 5.96 million tonnes. The achieved number was the highest Q1 figure since 2008.
Chile Output Down
In a report published by the government statistics agency INE, the world’s top copper producer, Chile witnessed a fall in its output of the base metal mainly due to the decline in extraction and processing of the country’s exports. Copper mines of Chile produced 430,100 tonnes in February which was a decrease of 4.8%. The report factored in the drop to falling ore grades which is a common problem in Chile’s extensive but obsolete mines. In a surprising revelation, copper accounts for around half of the South American countries export and is critical to the continents economic output. In February, the total manufacturing output dropped 0.6% attributed to the 4.2% slump in the production products.
The economy of Chile, like India and Nepal, has been hard hit by a growing second wave of C0ronavirus cases leading to widespread preventive measures including lockdowns to control the burning situation. During the pandemic, the mining sector has weathered a brewing storm, and maintained supply although production from some of the major mines observed decline in the preceding months as government authorities persisted with restrictions.
The scarcity of resources is one of the grave challenges facing the new world order in the upcoming years and copper will be leading the debate. Analysts opine that peak oil demand overlooks the fact that without a surge in the usage of copper, substitution of renewables for oil will not occur. Ironically, a metal which launched the Copper Age that transitioned civilization from the Stone Age to the Bronze Age could also be the metal that determines whether the modern society thrives in a new economy or struggles to survive in a modern world run on gas and oil. For that, we need to find more copper. And by that, I mean a lot more.