Copper surges on Peru protests, China futures launch

Copper prices set fresh multiyear highs over concerns of possible supply disruptions following unrest in Peru and optimism about the launch of a Chinese futures contract open to international investors.

On the Comex market, copper for delivery in December gained 2.7% to US$3.2625 per lb. (US$7,193 per tonne) amid heavy buying, with more than US$8.3 billion worth of metal traded by mid-afternoon in New York.

Monday’s trading brings the bellwether metal’s recovery since the height of the Covid-19 induced sell-off (which sent the copper price crashing to below US$2.00 a pound) to more than 70%.

Peru’s currency fell to a record low over the weekend amid political chaos and the largest protests in the capital city of Lima in decades. Experts have warned that further upheavals threaten the fight against the coronavirus in the country of 32 million, which has one of the world’s highest per-capita death rates from Covid-19.

In a research note to clients, BMO Capital Markets said the unrest in Peru, the world’s second-largest copper-producing country behind Chile, while focused on Lima, could cause issues for copper concentrate logistics should the situation escalate.

An indication of the scarcity of concentrate for prompt delivery, spot treatment charges – paid by miners to refiners – plunged to an eight-year low of around US$45 a tonne last week, a 40% decline from the 2020 high hit in March. TC/RCs were already under pressure from reports that China has unofficially banned Australian imports of concentrate amid a political row between the two countries.

Chinese futures

As of Nov. 19, overseas investors will for the first time be able to trade copper futures on the Shanghai International Energy Exchange.

The new contract, priced in Chinese yuan, will exclude taxes and customs duty and will be delivered into bonded warehouses helping the exchange better compete with the London Metal Exchange. The current contract on the Shanghai Futures Exchange is aimed at local traders.

The success of the contract would likely establish a new benchmark price in Asia, given China’s dominance in copper markets. China accounts for more than half the world’s copper consumption, up from less than 40% in 2020 and only 12% in 2000.

Imports of unwrought copper reached 618,000 tonnes in October, bringing the year-to-date total to 5.6 million tonnes, already a record annual high.

Concentrate imports are also likely to set a new record this year despite scarcity on the spot market, although they are only slightly higher than 2019’s 22 million tonnes of shipments.

— This article first appeared in MINING.com, part of Glacier Resource Innovation Group.