Benchmark copper on the London Metal Exchange (LME) rose 1.4% to $6,398 a ton at 1600 GMT. On Friday, metal prices hit a month-long low of $6,226.
Copper prices rebounded on Monday, as the market shifted its attention back to robust economic growth and demand in China. Besides, there are expectations of improvement from manufacturing firms in Europe and the United States.
Oliver Nugent, an analyst at Citi, stated that prices stalled around $6,500, and there was some profit-taking. The short-term noise created by the funds has not changed the backdrop of healthy demand.
The metal price outlook for the medium term is strong. The narrative about China’s V-shaped recovery remains relevant. The country’s refined metal imports remain strong.
Chinese industrial production is steadily returning to levels not seen since the pandemic hit the country’s economy. Contained demand, government stimulus measures, and unexpectedly resilient exports are fueling the recovery.
Imports of unrefined copper and copper products rose to a record of 762,211 tonnes in July. It’s a 16.1% jump from the previous high of 656,483 tonnes in June and an 81.5% rise from 420,000 tonnes of July 2019.
Hudbay copper production drops 27% in Q2
According to Hudbay’s statement, consolidated copper production in the second quarter of 2020 amounted to 18,026 tonnes. It’s a 27% decrease from the first quarter of this year. Mainly, it is a result of the temporary suspension of operations at Constancia until the middle of May, amid the coronavirus outbreak.
Hudbay, a Canadian mining corporation, issued new guidance but warned that its mine in Peru faces impending risks. During the eight-week suspension at Constancia, Hudbay lost production.
The situation in Peru remains unstable. In response to the coronavirus pandemic, the government of the country declared the state of emergency on March 15. It has since been prolonged to August 31, 2020. There remains a risk of further interruptions to mining operations.
The company is actively observing the situation and any possible future impact on Constancia’s operations.
What is the outlook for the metal?
China started recovering from the coronavirus outbreak later in Spring. The country’s economic recovery was the main reason behind the increase in industrial metal prices. However, the resurgence of the deadly virus hampered the outlook for copper and other metals. On the other hand, tensions between the US and China intensified, which reflected on the commodity prices. Moreover, analysts warn that Chile and Peru, key copper-producing nations, may ease supply disruptions. It could further pressurize the red metal prices.
Considering the significant growth in demand from China and the US and Eurozone, analysts expect copper prices to trade higher.
According to Cochilco, the Chilean copper commission, the average price for the metal could increase by $2.62 per lb because of the Chinese economic recovery and drop in inventories. For the next year, Cochilco forecasts copper price to average at $2.85 per lb. The Chilean governmental body revealed that it can not fully rule out the risks of a second wave of the coronavirus infections in the US and Europe.