Most nonferrous metal prices staged a healthy recovery at the start of the 3rd quarter due in part to rising Chinese demand expectations, mine supply disruptions, rising oil prices, and a weaker dollar.
Copper prices in particular have been well supported, with the LME 3-mo. copper price up nearly 14 percent for the year-to-date to more than $6,300 per metric ton (+$2.85 per pound) as of late July.
Bloomberg reports that “the global copper market had a 65,000 ton deficit in the first five months of this year, according to the World Bureau of Metal Statistics. There’s a similar picture from the International Copper Study Group, which estimated the shortfall at 53,000 tons in April, paring the year’s surplus to just 80,000 tons. Freeport-McMoRan Inc., the world’s biggest publicly traded producer, reckons further gains are likely. Chief Executive Officer Richard Adkerson said a looming deficit will benefit the company, with prices expected to hit $4 a pound ($8,818 a ton) or higher, according to remarks on a conference call.”
Even nickel prices, which have underperformed for much of the year, have gotten a boost in recent weeks amid concerns about nickel ore supply disruptions in the Philippines. Filipino president Rodrigo Duterte was quoted as saying during his State of the Nation address that “…it’s possible that we shall put a stop to the extraction and exportation of our mineral resources to foreign nations for processing abroad and importing them back to the Philippines” while promising to tax mining companies “to death.” LME 3-mo. nickel prices shot up to $10,000 per ton in response.
Scrap metal prices have largely followed primary prices higher this year, although concerns about potential Chinese scrap metal import restrictions may take a toll on scrap market sentiment heading into 2018. A note on SMM Information & Technology Company’s website indicated that a ban on machinery waste and other products for the purpose of extracting metals scrap could cut Chinese scrap imports by as much as 900,000 tons a year of contained copper, Bloomberg reports. Here is the trend in U.S. copper and aluminum scrap producer price indexes from 1986 through the first half of 2017:
Looking forward, the median forecast of analysts polled by Reuters is for a 44,000 ton global copper market deficit this year and an average fourth quarter LME copper cash price of $5,726 a ton. Those analysts are also projecting average LME cash prices of $1,918 per ton for aluminum and $2,734 per ton for zinc in the fourth quarter.