Monsters of Rock: We have a tightening copper market … but it's all a little knotty
US could rely on copper imports even if it encourages new mine builds
Lithium surplus to run longer without curtailments: WoodMac
It was once a paint by numbers exercise to read the copper market, an economic bellwether known as Dr Copper for its ability to project and diagnose shifts in the wider global economy.
That comes down to its fairly obvious industrial uses. Poles and wires carry copper for its conductivity. Cabling is used in housing, infrastructure, cars – EVs especially, train lines, power plants.
You get the gist. Growth is good for the commodity, recession is bad.
But the current copper market has become mosaic-like in its complexity. The A-to-B plot line of a Home and Away episode has been replaced with the density of Infinite Jest.
Copper prices are broadly stable and at historically strong levels amid threats to global economic growth, Benchmark Mineral Intelligence tells us in their weekly note.
Three month LME copper is clocking in at US$9431/t at the moment.
But prices are uneven, driven by stockpile purchases in the US where tariffs on copper imports are being feared, while stockpile draws in China also point to market tightness, curious given the broader economic environment generally and in China specifically.
A 3.7% collapse on Wednesday last week from US$9440/t on the LME rebounded from US$9093/t to US$9395/t by Friday, indicating the fragility of any particular market theme right now. COMEX purchasing by US buyers has not helped the volatility.
"Copper prices continue to be elevated by severe market tightness resultant from tariff induced front-loading at the COMEX, leading to backwardation at both the SHFE and LME," Benchmark says.
Chinese and US economic indicators have been pointing down, normally a negative for copper.
But the rush to move material to the States and strong demand for concentrate and metal in physical markets has kept a floor under prices.
"As stock draw-downs in China have begun to spread to LME warehouse systems, the extent to which this supply crunch continues will be closely watched," Benchmark noted.
"Although the Fed's decision on interest rates would normally be in-focus, a projected high probability (>95%) of holding rates stable mean markets will likely look more closely at alternative signals this week - such as firm commitments on US-China de-escalation."
US mining
Copper buyers in the United States are reliant on imports from overseas, which has led to a rush in copper demand and a major push from the US Government under Donald Trump to refire domestic production, which has slid over the past 27 years from ~1.9Mt to ~1.1Mt.
This could be great news, especially with regards to permitting, for US based miners and explorers like New World Resources (ASX:NWC), Rio Tinto (ASX:RIO) and Golden Mile Resources (ASX:G88).
But Benchmark warns tariffs and Executive Orders won't be able to bring the whole supply chain to the States in the near term, even if the development of large mines like Rio's Resolution and Teck's NewRange go ahead.
"This could go a long way to lower the net imports of copper to US, which last year totaled well over 700,000t," Benchmark said.
"Yet, an important bottleneck isn't mining or refining—it's smelting. The US currently has just 590,000tpa of smelting capacity, with only one potential project in development: the Hayden Restart, which could add 200,000tpa. In 2024, exports of copper contained in concentrate reached 325,000t, accounting for 48% of the year's total concentrate production of 674,000t.
"Currently, even if the US chose to process all of its copper concentrate domestically, the existing smelting capacity would be insufficient. Without a rapid expansion of smelting infrastructure, accelerating copper concentrate projects alone won't address the gap. As a result, the US will continue exporting concentrate—only to reimport it later as finished cathode."
Lithium recovery
As investors continue to wait for the lithium market to rebound, one of its most bearish forecasters says curtailments will be needed to bring the market into balance.
The issue is the high cost mines that need to come out of the supply chain are in China, also the market's biggest customer.
That means any mine or refinery closure would be a delicate manoeuvre to pull off.
WoodMac continues to see the lithium market surplus holding into the early 2030s, according to a deck prepared by its lithium research director Allan Pedersen for a forum in late April.
"In our view, curtailments should predominantly come from China, which is the largest producer and where most production is suffering from low or negative margins in the current price environment," Pedersen said in a note.
"However, China is also the world's biggest consumer, which presents a challenge to curtailments. What's more, increasing production can lead to lower unit costs, which incentivises producing higher volumes rather than cutting supply.
"The big question for the sector is, will sufficient capital be available to survive the downturn until demand growth catches up?"
It should be noted, other analysts see small deficits returning as soon as next year, including Argonaut and Fastmarkets.
They think demand is growing quicker than the market realises, with EV sales growth especially in China remaining strong and battery energy storage systems grabbing a rising market share for lithium.
This week, WA's newest lithium producer Liontown Resources (ASX:LTR) picked up a $15m interest free loan from the WA State Government along with a waiver of port fees and mining tenement rental rebates related to its Kathleen Valley mine until the spodumene spot price hits US$1100/t for two consecutive quarters.
Miners and explorers keep on waiting.
The ASX 300 Metals and Mining index rose 0.96% over the past week.
Which ASX 300 Resources stocks have impressed and depressed?
Making gains
Resolute Mining (ASX:RSG) (gold) +18%
Liontown Resources (ASX:LTR) (lithium) +16%
Pantoro (ASX:PNR) (gold) +13.2%
Emerald Resources (ASX:EMR) (gold) +12.6%
Eating losses
Patriot Battery Metals (ASX:PMT) (lithium) -7.6%
Lynas (ASX:LYC) (rare earths) -6.9%
Coronado Global Resources (ASX:CRN) (coal) -5.7%
Adriatic Metals (ASX:ADT) (silver) -5.4%
At Stockhead, we tell it like it is. While New World Resources and Golden Mile Resources are Stockhead advertisers, they did not sponsor this article.
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