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Despite Mine Expansion, Copper Price Outlook Still Bearish

Let’s begin with the good news first. Global copper mine capacity rose nearly 5% to 20.38 million tons (MT) between January and September of 2022. According…

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This article was originally published by Metal Miner

Let’s begin with the good news first. Global copper mine capacity rose nearly 5% to 20.38 million tons (MT) between January and September of 2022. According to a report by the International Copper Study Group (ICSG), this was mainly due to the additional production at new or expanded mines. That said, global demand for the metal was also up. Indeed, in the first nine months of the year, demand rose 2.6% to nearly 19.30 MT. This is a rather good news for those concerned with current copper price trends.

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Production Up in DRC and China, but Down in Chile

Before you applaud, let’s address the bad news. Sector analysts are certain copper markets will remain bullish in the long run. According to them, factors like stricter environmental regulations, among other things, are likely to persist and worsen. Such regulations will affect new mine projects, making it harder for smelter expansions to meet demand. All of this will dampen global copper prices. In fact, it’s possible the copper price will stay below US $8,000 MT through 2023 and perhaps 2024.

The ICSG recently reported that the global refined copper market deficit had widened to 295,000 T in September. This represented significant growth from the 234,000 T seen a year ago during the same period. To many experts, it’s a hint of things to come. However, it’s worth noting that global output also increased between January and September. Specifically, it rose 2.3% year on year to 19.0 MT. At the top of the list was China, the world’s leading producer of refined copper. Altogether, the country added 2.5% to its yearly output.    

On the other hand, Chile, the world’s second-largest producer, saw a 4% decline in output. This was mostly due to operational issues and smelter maintenance shutdowns. Fortunately, the Democratic Republic of the Congo really stepped up to the plate. In total, the country reported a 17% increase in production. In the DRC’s case, the increase was mainly due to its ramping up new solvent extraction and electro-winning plants. Last but not least, global secondary production from scrap rose 0.3% to 3.10 MT between January and September.

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Many Factors Still Affecting the Overall Copper Price

With most metals, the global lock down spurred on by the COVID-19 pandemic had a negative impact on the copper end-use sectors. While last year’s global demand recovered from the nose dive it took in 2020, it still remains below pre-pandemic levels in some countries.

Which brings us to the next crucial question – how will China address copper production and trade in the coming months? The recent report shows that Chinese consumption grew 3.8% between Jan-Sept. However, the fresh bout of COVID currently sweeping across the country has many insiders very nervous.

Indeed, the unprecedented street protests in China last week over fresh pandemic restrictions caused the copper price index to fall on Monday. There are strong fears that the restrictions will have a negative effect on the Chinese economy, which just started to show renewed growth.

For instance, on New York’s Comex market, copper for March delivery fell 1%, touching US $7,915 per ton. Meanwhile, the average monthly global copper mine capacity currently stands at 2,264.2 MT where it was 2,156.4 MT of a year ago.

Already, the sustained rates of COVID infection have constrained mine output in a few copper producing countries. If China’s pandemic woes continue, along with insufficient smelter capacity, then China’s domestic copper uptake will suffer. If that happens, we can expect the copper price to react accordingly.

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