Trafigura warns the world is running low on copper

Global copper inventories have fallen to dangerously low levels, one of the world’s largest commodities traders Trafigura warned.

Speaking at the FT Mining Summit on Thursday, Kostas Bintas, co-head of metals and minerals trading at Trafigura, said the copper market is spinning today with inventories covering 4.9 days of global consumption and expected to hit 2.7 this year. days will end, according to its own forecasts. Copper inventories are usually counted in weeks.

The price of copper, which is used in everything from wind turbines, electrical wires to electric vehicles, is now trading at around $7,400 a ton, some 30 percent lower than at the beginning of March when it broke above the record $10,000 a ton. traded.

Limited stocks increase the risk of a sudden price hike if there are major declines and traders rush to secure supplies.

While the strong dollar and fears of a global recession have weighed on copper prices in recent months, global metals executives argued Thursday that limited supply in the market continued to support prices.

“While so much attention is being paid to the weakness in the real estate sector in China, infrastructure demand, electric vehicle-related copper demand more than makes up for it,” Bintas said. “It not only completely eliminates the weakness of the real estate, but also contributes to the increase in their consumption.”

He added that the situation was no different in Europe, where the region is accelerating its transition to renewables as it tries to forgo Russian gas, leading to an increase in demand for copper.

“It is no coincidence that the EU has decided to push forward the target of doubling solar capacity from 2030 to 2025. That requires a lot of copper,” he said. “Look at electric vehicles everywhere, [the numbers on the road] are surprisingly on the plus side. That’s a lot of copper too. As a result, we have been decreasing inventories during this very difficult year.”

However, some brass bears believe that the slowdown in China’s real estate market – where the metal is used in wiring, plumbing and facades – and the energy crisis in Europe will weigh on demand.

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Marcus Garvey, head of commodities strategy at Macquarie, said the copper market will reach a surplus of 600,000 tons next year as supply grows from Latin America and elsewhere. “All industrial metals will be in surplus next year,” he said, referring to the impact of the global macroeconomic downturn.

Copper inventories in the warehouses of the London Metal Exchange have fallen sharply this week. Peel Hunt analysts said that “traders in China are making an effort to secure metal as Shanghai shares have fallen recently and traders are grabbing what they can”.

Copper inventories in warehouses managed by exchanges such as the LME do not provide a complete picture of copper inventories in the supply chain, as many industrial users will hold their own metal reserves.

But visible stocks can have a major impact on market sentiment.

“We certainly have no problem selling copper,” Freeport chief executive Richard Adkerson told Reuters during a conference call to investors. “It’s just striking how negative the financial markets are about this industry and yet the physical market is so tight.”

Jonathan Price, chief executive of Canadian copper miner Teck Resources, said the “macrovision is very disconnected from the underlying physical fundamentals of the copper market.”

Bintas, who had forecast last year that copper price would reach $15,000 per tonne, said copper was being sold amid fears of a recession, but he expects to see a “structural price overhaul” “very soon” once those fears wane.

Given the copper shortage that is now occurring, “I think it’s reasonable to assume a higher price from what we have today,” he said. “Is it going to be over $15,000? I think time will tell.”

Jacky

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