Strong raw material demand sustains markets

Record-high prices for metals - and particularly copper - ease as stocks grow but recovering economies boost trader confidence. The shine has come off

What happened

The shine has come off copper slightly after a month in which its three-month price fell from over US$ 10 200 per tonne on 1 June to US$ 9 374.50 per tonne on the final day. After a period in which copper and iron prices reached record highs – copper was US$ 10 500 per tonne in mid-May – several reasons have contributed to the decline. None, however, undermines the general optimism around the red metal because of the anticipated worldwide growth in electric vehicles and the metal’s key role in their production.

Why it matters

In the US, copper prices fell after the Federal Reserve brought forward its expectations for raising interest rates. More broadly, downward pressure on prices followed China’s decision to release industrial metals from its national reserves to curb surging commodity prices. Concern over commodity price rises was first expressed by Chinese officials in May at a meeting with the biggest iron ore, steel, copper and aluminium producers. Then the National Food and Strategic Reserves Administration said it intended to sell 20 000 tonnes of copper, 30 000 tonnes of zinc and 50 000 tonnes of aluminium in early July.

Reuters reported these totals accounted for only 2.3% of China’s copper output in May and 4.4% of imports of unwrought copper in the same month. Another challenge for traders has been worries about sending cargoes to Chinese ports implementing tougher quality controls on imports off secondary materials. Anecdotal reports suggest they are diverting cargoes elsewhere in Asia and to Europe at discounted rates just in case.

Looking back, the US Bureau of Labour Statistics reported that all scrap commodities were up for the 12 months ending May 2021. According to the Producer Price Indexes, copper base scrap led the way rising 89.6% over the period. Metal markets in Europe have remained buoyant in recent weeks even though higher prices are likely to be behind us for the time being.

This news brief is based on reporting published by Recycling International on 2021-07-07. The original report is linked below.