Copper’s 2017 demand-supply dynamics

As noted previously, copper prices have shown strength recently, piggybacking the weak US dollar. However, we should remember that in the medium-to-long term, demand-supply dynamics are a key driver of copper prices (TECK) (GLNCY). In this article, we’ll see how copper’s demand-supply balance looks in 2017.

Inside Copper’s 2017 Demand-Supply Dynamics

Demand

  • China’s car sales regained momentum in June with total vehicle sales rising 4.5% year-over-year. We saw a yearly decline in China’s car sales in the two months prior.
  • China’s manufacturing PMI (purchasing managers’ index) expanded in June. The official PMI came in at 51.7 in June, compared with 51 in May. A private survey conducted by Caixin also showed expansion. The official and the Caixin PMI were better than expected.
  • China’s June real estate investment and fixed asset investment data also showed signs of stabilization. However, some analysts expect a slowdown in China’s real estate activity in the second half of 2017.

Copper supply

According to the ICSG (International Copper Study Group), the global mined copper supply fell 3.5% year-over-year in the first four months of 2017. Issues at key copper mines, including those of Freeport-McMoRan (FCX) and BHP Billiton (BHP), were the key driver of the decline in mined copper production. However, the ICSG estimates that, despite lower mined copper production (DBC), global refined copper production was at a similar level to that seen in the corresponding period last year, due to an increase in secondary production.

To analyze different observers’ views on copper markets, read These Contrarian Views Could Leave Copper Bulls Heartbroken. Don’t forget to check our Copper page for Freeport’s 2Q17 post-earnings release analysis.

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