The three-month copper contract on LME gained by 11.91pc to settle at $7,760/mt on Dec 11 from a month ago, according to a report by Cochilco (the Chilean Copper Commission). The report added that copper inventories at metal stock markets will continue to drop by 300,000mt, equalling 4.8 days of global copper consumption.
The report mentions that since Nov 11, the inventories have dropped by 20pc of 73,000mt, underlining weak supply of red metal due to the second wave of the COVID-19 infections in copper-producing countries.
China, a major copper consumer, is experiencing accelerated ‘V’ shaped growth that boosted the demand for base metals in the second half of 2020. The increasing copper imports in to China reflected the recovery of electronic and automobile sectors there.
The report suggests that as the remaining parts of the world have started their journey towards economic recovery, the demand for copper will surge which will drive prices up.
This week China will be publishing November’s industrial output and fixed asset investment, both indicators of the demand for red metal in 2021. Due to this, investors and speculators will maintain high metal-buying positions in future operations in the exchanges and the same will support the rise in the price.
In November, imports of refined copper, which includes anodes and copper products, dropped for a second consecutive month, reaching a six-month low. Chinese copper imports in November and October dropped due to the high price of red metal and the undesired arbitrage conditions (the price differential between the London and Shanghai metal exchange)
China imported 526,000mt of copper in Nov 2020, down by 9.2pc from October. Chinese copper imports rose by 38.4pc in the first 11 months from the prior-year period due to the strong rise in imports in June and July.
Chinese copper exports surged by 21.1pc in November from the prior year, the highest rate since Feb 2018. The market participants had assumed that the rise would be of 12pc due to the rise in demand for equipment offering protection against the COVID-19 and the rise in demand for electronic products.
Chinese trade figures suggest a rebound in economic growth in the countries that import copper products from China. This highlights the growth in industrial sector abroad considering copper being the main driver.
Inventories in warehouses drop
The refined copper inventories of the three-month copper contract witnessed a joint decrease of 19,525mt or 6.09pc from the prior week. Shanghai Futures Exchange experienced 16pc drop while London Metal Exchange inventories dropped by 2.2pc from the prior week. So far this year, copper inventories have dropped by 0.8pc from the prior year.