A Bird’s-Eye View On Copper Outlook!

As very well-known in the metal space, copper is a ductile and malleable element with excellent heat and electricity conducting features along with antimicrobial and corrosion resistance features. It is found in carbonated deposits, sulphide deposits, and in silicate deposits. It is also present in natural life form. It is one of the most recycled elements among all the metals, and this feature helps in the massive amount of energy savings as it is a kind that doesn’t lose its physical and chemical properties on recycling as such. Given its wide use in so many applications such as piping, wiring, infrastructure, power generation, transportation, building construction, and electrical product manufacturing, etc., it is known to be an important contributor to any economy. Due to its aesthetic appeal, it is used in parts in construction work as it has a high melting point, and any treatment like burning etc., does not as such lead to release of toxic gases.

It is well known that the largest producer of mined copper and blister and anode have been Chile and China, respectively. As indicated by economists, for the first 10 months in 2018, world mine production increased by 2.4% and this consisted of solvent extraction-electrowinning and concentrate production. This increase in production was due to week output in countries like Chile, the Democratic Republic of Congo (DRC), and Indonesia in 2017. In Chile, production rose by 6% in 2018; while in 2017, production suffered due to strike at the world’s biggest copper mine at Escondida. In DRC and Zambia, production increased by 12% and 8% respectively, as there was a temporary shutdown in the production in both the countries in 2017. In Indonesia, production rose by 19% as there was a temporary ban on exports of concentrate copper in 2017. The supply in 2018 was little impacted due to low output in the USA and Canada which were -3.5% and -11% respectively. Output in Peru (2^nd largest copper mine) consolidated after years of strong output growth. The mine production has increased in Africa, Latin America, Asia, and Oceania by around 8%, 3.5%, 2%, and 10% respectively, whereas the production decreased in North America by 5% and remain unchanged in Europe. World’s refined production and secondary production (re-cycled) increased by 1.2% and 5%, respectively in the initial 10 months of 2018. The main reason behind refined production growth was China’s continued capacity expansion. Overall offset in the growth of refined production and secondary production was because of 34% decline in India, and decline in Poland, Philippines, the United States, and Australia due to operational issues or maintenance shutdowns.

World’s copper consumption has also been noted to increase by 2.8% in the initial 10 months of 2018 majorly contributed by China where consumption increased by 7%, and net refined copper import increased by 25%. Another significant consumption increase was observed in countries like Japan, India, the EU, and the United States. Consumption decline was seen in countries like South Korea and Taiwan. Overall consumption of the world excluding China declined by 0.5%.

Lower than expected growth in the global refined production resulted in the deficit of approximately 545,000 tonnes in the initial 10 months of 2018, which further added up to 625,000 tonnes after adjustments in Chinese copper bonded stocks.

As per International Copper Study Group (an intergovernmental organization of copper producing and consuming nations), copper mine capacity is likely to grow at a rate of 2.2% per year till 2021 as more project expansions will be under-way. Recently, many operational constraints and issues related to the environment, local communities, budgetary constraints, etc. are getting resolved and several halted projects have started obtaining approvals and investments. Copper smelter capacity is expected to grow at a low single digit per year through to the next three years with 2% higher Chinese capacity expected by 2021. A 3% growth for copper refinery capacity per annum has also been indicated by year 2021.

On technical charts, copper price has crossed 20, 50 and 200 -day moving average, and this has reflected a sign of a reversal in trend fraom bearish to bullish outlook. So with every dip, certain units can be accumulated for short to medium term gains depending on the investment and portfolio requirement.

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