Financial Associated Press, October 21 (Editor Liu Rui)Trafigura, one of the world‘s largest commodities traders, has warned that global copper inventories have fallen to dangerously low levels: there may only be enough for 2.7 days of global consumption.
He mentioned that although some market participants are still concerned about the impact of global macroeconomic headwinds on copper demand, in fact, in China and Europe, copper demand from infrastructure, electric vehicles, photovoltaic power generation and other fields is still strong.
Looking ahead, Trafigura Group and many large metal industry companies expect that copper prices will continue to be supported by supply shortages.
Copper demand remains strong
Speaking at a mining summit on Thursday, Kostas Bintas, co-head of metals and minerals trading at Trafigura, said the copper market currently has only 4.9 days of global consumption in stock. According to Trafigura’s own forecasts, copper inventories may only cover 2.7 days of global consumption by the end of the year.
Copper has a wide range of applications, whether it is real estate and construction, or new energy fields such as wind turbines and electric vehicles, which require a large amount of copper.
However, due to macroeconomic headwinds this year, some market participants are worried about the outlook for copper demand.
In this regard, Bintas disagreed:
“Despite concern over weakness in China’s real estate sector,China’s infrastructure, electric vehicle-related copper demand is strong, but it is quietly making up for copper demand…which actually not only fully offset the weakness in real estate, but also increased their consumption growth. “
He added that the situation in Europe was no exception. The region’s accelerating transition to renewable energy, in an attempt to wean itself off its reliance on Russian natural gas, has also led to an increase in copper demand.
“The EU has decided to bring forward its goal of doubling its solar power capacity from 2030 to 2025, all of which will require a lot of copper,” he said. ) surprisingly, that also takes a lot of copper. So our (copper) inventories have been dwindling in this very difficult year.”
Market views and physical fundamentals are very disconnected
Copper prices have been under pressure in recent months due to a strong dollar and heightened fears of a global recession. Copper prices are now around $7,400 a tonne, down about 30 percent from a record high of $10,000 a tonne in early March.
The performance of copper prices during the year was mainly due to the belief by some bearish market participants that the slowdown in China’s real estate market and the energy crisis in Europe would put pressure on demand.
For example, Marcus Garvey, head of commodities strategy at Macquarie, sees a 600,000-ton surplus in the copper market next year as supply increases in Latin America and elsewhere. He believes that “all industrial metals will be in surplus next year” amid the global macroeconomic downturn.
However, most executives in the global metals industry hold the opposite view, arguing that the current severely limited supply of copper will support copper prices. They believe that given the limited copper inventories, the risk of a subsequent sudden surge in copper prices will also increase. At the same time, traders will scramble to buy to secure supply should copper prices fall sharply, supporting copper prices.
For example, Freeport CEO Richard Adkerson recently told investors on a conference call:
“We certainly have no problem with copper sales.It’s amazing how negative the financial markets are about the industry, while the physical markets are so tight。”
Jonathan Price, chief executive of Canadian copper miner Teck Resources, also said:
“The macro view is very disconnected from the physical fundamentals of the copper market.”
Bintas had forecast copper prices last year to reach $15,000 a tonne. He said the recent sell-off in copper was driven by recession fears, but he expected a “structural re-pricing” “very soon” once those fears subsided.
Given the current shortage of copper, he said, “I think it’s reasonable to assume that the price of copper will go even higher — eventually over $15,000? I think time will tell.”