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The global copper inventory has fallen to 4.9 days’ consumption and will end this year at only 2.7 days, Kostas Bintas, co-head of metals and minerals at Trafigura, a major commodities trading firm, told the Financial Times Mining Summit last week.
Copper stocks are usually counted in weeks, not days, the FT noted.
The low inventory risks a spike in price if manufacturers suddenly scramble to lock up future supplies, Bintas warned.
Last week, copper supplies in warehouses maintained by the London Metal Exchange plunged as “traders in China are scrambling to secure metal as Shanghai stocks have fallen recently and traders are grabbing what they can,” analysts at Peel Hunt said in comments quoted by the FT.
“While there is so much attention being paid to the weakness in the real estate sector in China” reducing copper demand, “the demand for infrastructure [and] electric-vehicle-related copper demand more than makes up for it,” Bintas said.
“It not only cancels completely the real estate weakness but also adds to” increases in consumption,” he added.
The crunch is worsened by Europe’s rush to expand renewable energy as it faces a loss of oil and gas from Russia.
Russia has cut off most of its natural gas exports to Europe and Europe has pledged to end imports of Russian oil by January, as we reported in “EU Mulls Ban on Russian Oil. Will It Matter?” (10 May 2022).
“Europe has decided to bring forward the target of doubling its solar capacity from 2030 to 2025, [which] requires a lot of copper,” Bintas noted.
The number of “electric vehicles…is surprising to the upside. As a result, we’ve been drawing down stocks through this very difficult year,” he said.
However, China’s lingering real estate slump and global economic doldrums will continue to ease demand for copper, some analysts told the FT.
“All industrial metals will move into surplus next year,” Marcus Garvey, Macquarie’s chief commodities strategist, told the FT.
Copper’s surplus will grow to 600,000 tons next year as new supplies from Latin America reach the market, he predicted.
Copper was trading near $6,960 on Monday, 24 October, down from its record above $10,000 last March, which we reported in “While Stocks Tanked, Commodities Boasted Best Quarter in 31 Years” (5 Apr 2022).
Shrinking inventories have kept prices from falling further, the FT said.