Copper prices climb as China re-opens
Copper prices are on a tear, having risen this week to the highest levels since June as investors bet that China’s pandemic reopening will boost demand and drive up prices amid low inventories. On New York’s Comex market, copper for March delivery touched 4.35 USD per pound (9,581 per ton). Still, concerns over a global recession kept the metal trading within a tight range on Friday (January 20), even as it closed out the week with a gain.
Supply disruptions in Peru due to protests could further push up copper prices. Las Bambas – the country’s third-largest largest copper mine, operated by Chinese state-owned miner MMG – hasn’t sent out any copper concentrate since January 3 as anti-government protesters have blocked traffic to and from the mine. Glencore’s Antapaccay mine, which together with Las Bambas accounts for nearly 2% of global copper output, shares the same highway access to ports, and has been operating at “restricted” capacity this week due to the protests and blockades.
More broadly, copper’s climb this week underscores the impact that China’s reopening is poised to have on commodity prices, with it on international supply chain pressures and inflationary trends. Much of the relief in those over recent months has been a function of minimal economic activity in China. Will that country’s return to normal prompt a new round of supply chain strains and sharp price increases? Or will its revived industrial capacity make up the gap?
Copper Prices (HG:CMX), January-December 2022
Bolivia picks CATL to develop its lithium
Bolivia has picked a consortium that includes Chinese battery giant CATL and Chinese miner CMOC to develop the country’s largely untapped Uyuni and Oruro salt flats. The deal will help CATL—which doesn’t currently produce lithium, having lost its bid in 2021 for the Canada-headquartered and Argentina-focused Millennial Lithium Corp.—stake out a key upstream node in the EV battery supply chain.
Also part of the CBC consortium is Brunp, a CATL subsidiary with investments worldwide in battery materials, resources, and recycling projects. (Still another subsidiary of Brunp and CATL is Contemporary Brunp Lygend, or CBL, with investments in Indonesian nickel mining, processing, and smelting projects.)
Europe rushes to Russian diesel, while it can
As the EU’s February 5 ban on Russian oil product imports inches closer, European traders are scrambling to stock up on Russian diesel, pushing flows for January toward a one-year high. The expanded embargo – compounded by looming sanctions that will put an additional price cap on Russian oil products – will rejig trade routes and heighten price volatility.
Europe, which has long relied on Russian diesel, will likely turn to China to meet its shortfall. And some of that Chinese diesel will itself be refined from Russian crude: Shipping data show at least four Chinese-owned supertankers carrying Urals crude headed for China. Meanwhile, soaring demand for oil storage tanks in Singapore suggests that Russian oil is getting mixed in the Southeast Asian country and re-exported globally.
Good for energy, bad for food
While Europe faces the prospect of a diesel shortfall of some half a million barrels, it can find some relief in the fact that it has made it through half of winter with natural gas inventories still at record highs. As of January 18, the bloc’s gas storage is still over 80% full, according to Gas Infrastructure Europe. In part this is thanks to mild weather, plus market-driven high prices that curbed demand from commercial and residential users. But there’s a downside to the mild weather: Lack of snowmelt, which is depleting water resources, and in turn curbing crop yields and pushing up food prices—another major driver of inflation.