Copper’s ups and downs

The price of copper could stabilize over the next five years but is expected to rebound going forward as supply will be insufficient to meet demand, said Ibrahim Yucel, a senior consultant with CRU North America. Yucel, who is based near Pittsburgh, spoke during the American Copper Council Fall Meeting Nov. 4 in Key Biscayne, Florida.

“Whenever it comes to copper pricing in the current market, or at any other point in time, there’s always a few key trends, one of which is inflation, or fears of inflation,” he said. “Copper pricing is highly intertwined and correlated with inflation. So, whenever there is fear of increased inflation in the future, the copper price goes up.”

In addition to the inflation currently being experienced, which CRU believes to be transitory, Yucel said other factors that are “more specific and unique to this time frame” are influencing copper pricing. “First, we’ve seen a tightening in the scrap market. We have extraordinarily low levels of exchange inventories, amounting to less than one week of global consumption. And the last time we had that was several decades ago at a point where the copper global market was much smaller.”

He added that, according to CRU’s analysis, whenever exchange inventories fall below one week of global consumption, copper pricing experiences a major spike, “which is exactly what we’ve seen in the past few weeks following LME Week.” He was referencing the annual gathering of the global metals industry that the London Metal Exchange hosted from Oct. 11-15.

Supply chain issues and disruptions in the container freight market also have created a mismatch in supply and demand, Yucel said. “Cathode is either in the wrong place or at the wrong time,” he added, “and that has further multiplied the issues associated with low inventories.”

Yucel said container shipments of blister or other copper raw materials from the African copper belt to China would normally take two months but now are taking five months because of these issues, which is affecting 300,000 tons of copper per month.

Along with the spike in pricing following LME Week, Yucel said “an extraordinary backwardation to the forward curve” has been seen in the last few weeks.