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Copper Crunch Ready to Facilitate with More Supply Heading to China

(Bloomberg) – Chinese copper smelters grappling with a shortage of semi-processed material are slated to see an influx of supply from South America, a sign that the strain helping to overload the metal’s rally could be easing. A slew of ships arriving in Chinese ports from Chile and Peru, the country’s top suppliers, as bottlenecks ease, according to IHS Markit’s principal shipping analyst Daejin Lee. The amount of concentrate expected to reach the Asian nation may rise almost 60% from the February volume, he estimated. “The narrative could be shifting from very tight supply due to port congestion and logistical difficulties, and even waves in Chile, to more easier supply,” said Ed Meir, analyst at ED&F Man Capital Market. That might take some of the air out of the copper rally, he said. On Friday, copper on the London Metal Exchange fell further since October after driving a record high on expectations that a rebound in growth, helped by government pledges to invest in green infrastructure, will lead to a deficit. Rigidity in the concentrate market, driven by low raw material inventory, high freight rates and logistical challenges, has already driven Chinese processing fees to multi-year lows and raised concerns of production cuts that would reduce even more the supply of metals. China is expected to spike after the Lunar New Year, while treatment charges have likely bottomed out by now, Che Guojun, an analyst at state investigator Beijing Antaike Information Development Co., also arrived just as Chile, the largest copper-producing country , reported its worst month of production since the pandemic closures began. In January, production fell 8.3% from the previous month to the lowest level since February last year, according to data released Friday by the National Institute of Statistics. Copper fell 3.6% to settle at $ 9,077 a metric ton as at 5:51 pm in London. the biggest loss since October. All other major metals fell on the London Stock Exchange, with tin falling the most since March. Global bonds stabilized as markets returned to a firmer footing at the end of a week in which the Nasdaq 100 fell. “Rising interest rates weigh on risk appetite, with the news suggesting that the supply of copper concentrate from Chile and Peru could increase by about 60% in March, highlights the impact that the relaxation of the tailwinds cyclicals can have on price action, “TD Securities analysts led by Bart Melek said in a note. pointed to signs of rising forex inventories as a bearish indicator for the market, even as investors continue to pile copper. Stocks at London Metal Exchange warehouses rose the most since November in terms of tonnage on Wednesday and are heading to a second weekly increase. Inventories tracked by the Shanghai Futures Exchange rose to their highest level in three months last week after a week-long Chinese holiday. more people worked from home, according to Meir. “When life returns to normal, there will be more trips, dinners, cruises and flights. The consumer will spend less money on household and electronic items and the like. I’m not saying demand is going to crash, but you won’t see this crazy surge in demand for metals because everyone was stuck at home, ”he said. While there are other bears: JPMorgan Chase & Co. and BMO Analyst Colin Hamilton expects copper prices to decline in the coming months; some market watchers predict that the rally is not over yet. Goldman Sachs Group Inc., BlackRock Inc., Citigroup Inc. and Bank of America see copper retreat to all-time highs above $ 10,000 a ton. Copper prices still posted an unprecedented monthly gain in February and have more than doubled since their nadir in March. (Metal price updates in the seventh paragraph) For more articles like this, visit us at bloomberg.com, the most trusted source for business news. © 2021 Bloomberg LP

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