Copper has been on the rebound this week, surging more than 12 percent since Monday (July 24).
Prices hit a two-year high of $6,400 per tonne on Tuesday (July 25) on the back of supply concerns spurred by a brighter outlook for Chinese demand. The top copper consumer has outlined plans to ban imports of scrap metal by the end of next year, a move that could boost demand for refined copper.
On Thursday (July 27), LME copper prices closed flat at $6,330. “We’re getting into rarefied air here, and we’ll probably need an oxygen mask to move higher,” Robin Bhar, an analyst at Societe Generale (EPA:GLE), told Bloomberg.
China is also said to be planning a ban next year on some imports of machinery waste and other products used for the purpose of extracting scrap metal; that may also reduce supply.
“The market is very heated,” Xu Maili, an analyst at Everbright Futures, told the news outlet. “There is an outbreak of bullish sentiment following recent good macro data.”
After the surge in prices, some top copper producers saw share price increases. Mining giant Glencore (LSE:GLEN), which owns a stake in Peru’s Antamina mine, rose 6.8 percent. The Swiss commodities miner is bullish on copper, and has recently invested just over $21 million in Brazilian copper producer Paranapanema (OTCMKTS:PNPPY).
Meanwhile, BHP Billiton (ASX:BHP,LSE:BHP,NYSE:BHP), which operates the world’s largest copper mine, saw its share price gain 5.38 percent. According to the company’s latest production report, its copper output fell 16 percent in the 2016/2017 period due to power outages in Australia and a 44-day strike at the Escondida mine.
Similarly, Freeport-McMoRan (NYSE:FCX), the world’s largest publicly traded copper producer, saw its share price spike more than 15 percent on Wednesday (July 26) after the rally. It was also boosted by progress in permit negotiations with Indonesia’s government.
The previous day, Freeport Chief Executive Richard Adkerson said he is optimistic about reaching an agreement with Jakarta over its contract to operate in the country and run Grasberg, the world’s second-largest copper mine.
“We are now approaching a stage where both parties have expressed an objective of a near term resolution,” Adkerson said. A looming copper deficit could also benefit the company — Adkerson expects prices to hit $4 a pound or higher.
Indonesia has agreed to a special mining permit with Freeport that will grant the miner operating rights for Grasberg through 2021, Energy and Mineral Resources Ministry Secretary-General Teguh Pamuji said. “(But) the special mining permit hasn’t been signed yet,” he added.
Many market participants remain bullish on the red metal for the rest of the year. That’s the case for billionaire mining investor Robert Friedland, who explained why he believes copper will continue to outperform gold at this year’s Sprott Natural Resource Symposium. Click here to read the full article.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.