Fragile sentiment in the Copper market – Commerzbank

The price jump in Copper, temporarily rising by almost 5% in reaction to the news that the operator of the important Grasberg mine in Indonesia has declared force majeure on contracted supplies, demonstrates how fragile market sentiment is regarding the supply situation. The production at the mine had to be halted due to an accident at the beginning of the month. At least since the treatment and refining charges at Copper smelters had virtually collapsed - indicating a shortage of raw materials - concerns about a supply shortage have increased, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

Copper surges on Grasberg force majeure, supply surplus remains

"The latest figures from the International Copper Study Group (ICSG) in fact show that mine production in the first seven months of this year has developed better than in previous years. Growth has been driven by production increases in the top exporters Chile, Peru, and the Democratic Republic of Congo, whereas supply from Indonesia has declined by 32%, not least due to pre-existing issues at the Grasberg mine."

"Nonetheless, global mine production has increased by 3.4%. For metal production as well, experts report a rise of 3.9% for the first seven months, with output thus also exceeding last year’s figures. Reportedly, smelters in China have called on the government to more strictly regulate the expansion of production capacities. This suggests that production may not increase as significantly as in recent years but is likely to remain at a high level."

"Although global Copper demand is also increasing, driven by China, which accounts for about 60% of global demand, the continued dynamic production has recently resulted in a supply surplus of 100,000 tons. This means the global Copper market remains well-supplied, albeit less comfortably so than last year, when the surplus for the same period stood at 400,000 tons."