Mumbai: Despite the recent rally in copper prices, the overall undertone still remains bearish with a decline in Chinese and the US demand expected in second quarter of the calendar year.
Copper prices in the first quarter of 2008 have gained about 26 per cent and it was quoting at $8,180 a tonne on Friday. The three-month futures contract on LME was quoting at $8,350 per tonne.
Warehouse holdings
On Friday, copper inventory in LME warehouses came down by 825 tonnes to 1.17 lakh tonnes, just enough for two days of world consumption. The inventory holding has shrunk over 40 per cent since January. However, in China, the largest consumer of copper, it is piling up. Shanghai Futures Exchange accredited warehouses report a 200 per cent jump in warehouse holdings to 61,233 tonnes.
Institutional investors and hedge funds have been chasing metals in the last three months after the dollar lost its sheen against major currencies. Buoyant demand from China and concerns over supply from mines also helped copper sustain a higher price level. China’s copper consumption is expected to rise 11 per cent to 1.28 million tonnes (mt) in Q1 of 2008. China’s copper import rose 4.6 per cent to 2.39 lakh tonnes in January against 2.24 lakh tonnes in December last, an increase of 6.27 per cent — the highest since April last year.
“The import figures indicate that the shipments to China will slowdown in the coming days at it has already stored huge quantities of copper,” said Kishore Narne, Vice-President, Head-Commodity Research, Anand Rathi. The demand in China rose by 35 per cent to 4.861 mt in 2007, accounting for nearly quarter of world demand, which is estimated at 17.92 mt.
Production to be hit
World copper mine production is expected to increase by 7.6 per cent to 17 mt in 2008, owing to new mine development and increased capacity utilisation. Recent snowfall and extremely cold weather conditions in China, for the last two months, have disrupted mining activity. Moreover, power shortage in South Africa is expected to curtail mining activity. The country seems to have lost almost 10 per cent of production in February.
Global refined copper production in 2008 is estimated to increase by 4.6 per cent to 18.57 mt.
Many smelters in China have shut shop indefinitely due to power shortage. Problems for smelters in and around Beijing seem to be more acute as they have been told to stop production to control pollution ahead of forthcoming Olympic Games.
“An increase in operating expenditure due to higher power cost, delay in new refinery capacity additions due to equipment shortage and capex cost increase should have a negative impact on mining and refining activities in 2008,” said Narne.
Copper prices in the first quarter of 2008 have gained about 26 per cent and it was quoting at $8,180 a tonne on Friday. The three-month futures contract on LME was quoting at $8,350 per tonne.
Warehouse holdings
On Friday, copper inventory in LME warehouses came down by 825 tonnes to 1.17 lakh tonnes, just enough for two days of world consumption. The inventory holding has shrunk over 40 per cent since January. However, in China, the largest consumer of copper, it is piling up. Shanghai Futures Exchange accredited warehouses report a 200 per cent jump in warehouse holdings to 61,233 tonnes.
Institutional investors and hedge funds have been chasing metals in the last three months after the dollar lost its sheen against major currencies. Buoyant demand from China and concerns over supply from mines also helped copper sustain a higher price level. China’s copper consumption is expected to rise 11 per cent to 1.28 million tonnes (mt) in Q1 of 2008. China’s copper import rose 4.6 per cent to 2.39 lakh tonnes in January against 2.24 lakh tonnes in December last, an increase of 6.27 per cent — the highest since April last year.
“The import figures indicate that the shipments to China will slowdown in the coming days at it has already stored huge quantities of copper,” said Kishore Narne, Vice-President, Head-Commodity Research, Anand Rathi. The demand in China rose by 35 per cent to 4.861 mt in 2007, accounting for nearly quarter of world demand, which is estimated at 17.92 mt.
Production to be hit
World copper mine production is expected to increase by 7.6 per cent to 17 mt in 2008, owing to new mine development and increased capacity utilisation. Recent snowfall and extremely cold weather conditions in China, for the last two months, have disrupted mining activity. Moreover, power shortage in South Africa is expected to curtail mining activity. The country seems to have lost almost 10 per cent of production in February.
Global refined copper production in 2008 is estimated to increase by 4.6 per cent to 18.57 mt.
Many smelters in China have shut shop indefinitely due to power shortage. Problems for smelters in and around Beijing seem to be more acute as they have been told to stop production to control pollution ahead of forthcoming Olympic Games.
“An increase in operating expenditure due to higher power cost, delay in new refinery capacity additions due to equipment shortage and capex cost increase should have a negative impact on mining and refining activities in 2008,” said Narne.
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