China’s threat to ban imports of copper drives prices up

Following reports that China could ban imports of scrap metal by the end of next year – a move that would likely boost demand for refined metals in the world’s top importer – copper prices have jumped to the highest level in two years.

Copper prices on the London Metal Exchange hit $6,400 a tonne, a level not seen since May 2015, having risen by roughly 5 per cent over the last two sessions. Copper has been on the rebound this week, surging more than 12 percent since July 24.

Prices were also helped by weakness in the dollar, which has been boosting other dollar-priced commodities, with Brent crude oil moving back above $50 a barrel.

China, the top copper consumer has outlined plans to ban imports of scrap metal by the end of next year, a move that could boost demand for refined copper. Reuters reported that the recycling branch of the China Non-Ferrous Metals Industry Association said it had received a notice that imports of scrap metal including wire, motors and bulk scrap metal could be barred by the end of 2018.

Stock prices of major copper miners Glencore, BHP Billiton and Freeport-McMoRan were on the rise after copper prices reached their highest level since May 2015.

Share price spurt

After the surge in prices, some top copper producers saw share price increases. Mining giant Glencore, which owns a stake in Peru’s Antamina mine, rose 6.8 per cent. The Swiss commodities miner is bullish on copper, and has recently invested just over $21 million in Brazilian copper producer Paranapanema.

BHP Billiton, which operates the world’s largest copper mine, saw its share price gain 5.38 per cent. According to the company’s latest production report, its copper output fell 16 per cent in the 2016/2017 period due to power outages in Australia and a 44-day strike at the Escondida mine.

Similarly, Freeport-McMoRan, the world’s largest publicly traded copper producer, saw its share price spike more than 15 per cent after the rally. It was also boosted by progress in permit negotiations with Indonesia’s government.

Freeport Chief Executive Richard Adkerson said he is optimistic about reaching an agreement with Jakarta over its contract to operate in the country and run Grasberg, the world’s second-largest copper mine.

“We are now approaching a stage where both parties have expressed an objective of a near term resolution,” Adkerson said. A looming copper deficit could also benefit the company — Adkerson expects prices to hit $4 a pound or higher.

Indonesia has agreed to a special mining permit with Freeport that will grant the miner operating rights for Grasberg through 2021, Energy and Mineral Resources Ministry Secretary-General Teguh Pamuji said.

Many market participants remain bullish on the red metal for the rest of the year. In fact, some analysts believe that copper will continue to outperform gold over the next few years.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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