The LME cash copper contract trades at a substantial discount to the three-month contract, suggesting adequate near-term supply. This caused a modest decrease in copper prices yesterday, which ended at 801.4. The market’s excess inventory is highlighted by this discount, which is the biggest since at least 1982.
Notwithstanding early optimism sparked by China’s better-than-expected manufacturing activity statistics and expectations of US and European rate cuts later in the week, worries about supply disruptions in key copper-producing regions remained. Droughts in Zambia and logistical problems in the Congo have hindered production, leading Chinese smelters to consider a combined output decrease to increase profits.
Seasonal variables, such as the slowdown of Chinese copper manufacturers during the summer months in the northern hemisphere have also influenced market dynamics. The steep reduction in the Yanghsan copper premium reflected industries’ decreased demand for actual copper.
In January, the global refined copper market had an 84,000 metric tonne surplus, up from a 27,000 metric tonne surplus in December, according to the International Copper Study Group (ICSG). Even with this excess, market volatility has been maintained by interruptions and logistical difficulties.
