The Reason For Copper's Dramatic Surge: Chinese Copper Inventories Hit Record

Two weeks ago we reported that one month after China created a record $520 billion in total credit (TSF), through February 18 Chinese banks had followed through with another CNY2 trillion according to MarketNews, meaning that in the first two months of the year China will have created a gargantuan $1 trillion in new credit between loans and unregulated shadow banking issues.

A question that emerged is what China is spending all this newly created money on. One answer emerged overnight when Bloomberg reported that after tumbling in the first half of 2015, copper inventories at the Shanghai Futures Exchange had been steadily rising, and in the most recent week soared by 11% to an all time high of 305,106 tons.

At the same time reserves at the London Metals Exchange declined for 11 days to the lowest level in more than a year, in other words China is shifting idle inventory from Point A to Point B.

Bloomberg adds that as a result of this massive spending spree, inventories tracked by the Shanghai Futures Exchange are higher than stockpiles monitored by the London Metal Exchange for the first time in a more than a decade.

This explains two things:

• for all talk of reform, China is once again building a bubble in excess capacity and stockpiling surplus commodities, which will likely last as long as China floods the economy with newly created bank loans;
• The recent surge in the price of copper, which has been a direct function of China's recent massive restocking

Most importantly, this means that the world is now back to the "old regime" China, where it was stockpiling massive amounts of inventory as only possible the "use of capital" of trillions in new money created, which of course is precisely the "regime" that created the hard landing scenario that China finds itself in at this very moment.

And so, can kicked. The only question is for how long.

ICSG releases February 2016 Copper Bulletin

The International Copper Study Group (ICSG) has released preliminary data for the month of November last year in its February 2016 Copper Bulletin. According to preliminary ICSG data, copper production and usage data points to a marginal production deficit of nearly 25,000 metric tonnes.

The refined copper market balance for the month of November ‘15 showed an apparent production deficit of nearly 25,000 metric tonnes. The production deficit for the month, after making seasonal adjustments for global refined copper production and usage, stood at 20,000 metric tonnes. The refined copper balance for the initial eleven months of the year ended in production surplus of around 50,000 metric tonnes as compared with a deficit of around 545,000 tonnes during the corresponding period in 2014.

World refined production increased by nearly 1.6% (nearly 330,000 t) during the first eleven months of 2015. Primary production was up 2%, whereas the secondary production held steady. The refined copper production during the month witnessed significant growth of 4.0% in China. The production by the US witnessed an increase of 1.5%. On the other hand, the refined copper output by Chile and Japan dropped by 1.5% and 4% respectively. The African and Asian region recorded 3% rise in refined copper production each. On the other hand, refined output declined by 5% in the Oceania region.

The world copper mine production has increased by around 3.5% (nearly 580,000 t) during the first eleven months of 2015. Concentrate production was up 4% during the period. The mine output from Peru and Indonesia recovered during this period. The mine production by Peru-the world’s third largest copper mine producer, increased by 19%. The production increased marginally by 0.8% and 2% in Chile and the US respectively. Region-wise, Asia recorded 8% rise in production. Also South America and North America recorded 4% and 2% increased output respectively. On the other hand, Africa and Oceania region recorded production decline of 1% and 3.5% respectively.

Meantime, global usage of the metal is estimated to have declined by around 1% (nearly 260,000 t) during January to November in 2015. The Chinese apparent demand increased marginally by nearly 2%. The usage by world countries excluding China has dropped by 4%. The Russian apparent usage dropped sharply by 48% whereas the EU demand declined 4%. Japanese apparent demand too witnessed sharp decline of 7%.

WBMS: Copper market records marginal surplus in 2015

The global copper market has recorded a surplus of 146,000 tonnes during the whole year 2015, as per the latest metals balances report published by the World Bureau of Metal Statistics (WBMS). It must be noted that the worldwide copper market had reported a surplus of 116,000 tonnes for the entire year 2014.

The global mine production during 2015 totaled 19.28 million tonnes. The mine production has grown by 4.3% when matched with 2014. Meantime, global refined copper output jumped higher by 0.7% over the previous year to 23.08 million tonnes. Refined copper output by NAFTA region countries reported significant increase of 85,000 tonnes during the year. Also, refined copper production was up sharply by 27,000 tonnes in India during 2015.

The global copper demand during 2015 stood at 22.931 million tonnes, essentially flat when compared with 22.811 million tonnes during 2014. The Chinese apparent consumption increased marginally by 148,000 tonnes during the year to total 11.451 million tonnes. The Chinese demand accounted for nearly 50% of the global demand. Also, EU-28 apparent consumption reported marginal decline of 2.4% from 2014 levels to 3.311 million tonnes.

According to the report, reported stocks of the metal stood higher by 143,000 tonnes during the entire year 2015 when compared with 2014 closing. However, stocks fell during the month of December last year.

The refined copper output during the month of December 2015 alone was 2,000.60 kt, whereas consumption during the month totaled 2,046.10 kt.

Copper mining's deepening costs crisis

GFMS Thomson Reuter's closely watched annual base metals review and outlook contains some stark warnings for copper miners.

The industry has made progress to reduce costs – since the first quarter of 2014 average cash costs have dropped by $303 a tonne according to GFMS calculations.

Over the same period the price of copper is down by $998 a tonne. And since the end of the June quarter of 2015 (the scope of the report) copper is down another $1,000.

It seems unlikely that the pace of cost reduction can improve much from the relatively modest pace of the last few quarters

GFMS says at the August low of $4,888 a tonne (a six-year low visited again at the end of last month) 10% of the industry is losing money on a cash basis.

But consider total costs (a better proxy for sustaining production levels at mines) and 47% of the industry is unprofitable at a 2009 copper price.

While costs have been reduced by 8% since the start of 2014, in Q2 2015 cash costs for the industry actually creeped up fractionally over the first quarter.

The inability of copper miners to make deeper cutbacks was despite a 50% fall in the price of crude oil and a sharp depreciation of producer country currencies against the dollar (on average more than 15% says GFMS) over the period. The usual culprit when it comes to rising costs in copper mining – falling grades – were relatively stable.

And the outlook is not all that rosy for the cost curve to lower much more:

"While cash costs may benefit from the lag in the transmission of lower energy prices, it seems unlikely that the pace of cost reduction can improve much from the relatively modest pace of the last few quarters.

"If copper prices continue to languish, additional cuts in sustaining capital are likely in the coming months, which will clearly impact the future production profile. We expect noise levels to increase in the coming months as the industry announces cuts to mine production and capital budgets, but how much of that translates into mine closures and/or a meaningful reduction in volumes remains to be seen."

Copper price surges on South America supply cuts

On Wednesday copper futures staged a comeback from six year lows hit earlier in the week as supply disruptions from top producing countries Chile and Peru lift sentiment in beaten down sector.

On the Comex market in New York copper for delivery in December surged as much as 4.7% to a session high of $2.3575 or $5,200 a tonne. Today's advance lifted the red metal out of bear territory for 2015, but at a more than 17% drop since December 31 following a 16% retreat in 2014, no-one's celebrating a bottom yet.

Today's big jump in heavy volume came after news from top producing country Chile.  Output at one of the world's largest copper mines, Collahuasi, will be cut by 30,000 tonnes due to current market conditions.

The mine, owned by Anglo American and Glencore produced 470,000 tonnes of copper in 2014, roughly 2% of global output. Earlier this month Glencore announced it's idling mines in Zambia and the DRC that would remove more than 400,000 from the market.

Also on Tuesday Peru declared a state of emergency in the area around the Las Bambas mine after clashes between police and protesters left four people dead and 16 seriously injured.

Minmetals acquired Las Bambas from Glencore in April last year in a controversial $6 billion deal tied to the Swiss giant's merger with Xstrata

Las Bambas is majority owned by China's Minmetals and the 400,000 tonnes per year mine is set enter production in January next year. Minmetals acquired Las Bambas from Glencore in April last year in a controversial $6 billion deal tied to the Swiss giant's merger with Xstrata.

New mines in Peru coming on stream this year and 2016 would double production to 2.8 million tonnes, placing the Peru in second place globally behind Chile.

Copper's move higher gave a bit of a lift to beaten down copper stocks with Glencore's (LON:GLEN) jumping 14% as it continues to recover from a more than 30% fall in London in Monday. Anglo American (LON:AAL) shares also also traded up in New York but year to date declines at the diversified miner remain more than 50%.

Freeport-McMoRan (NYSE:FCX), which vies with Chile's state-owned Codelco as the world number one copper miner in terms of output, was trading 5% higher in early-afternoon dealings but investors in the the Phoenix Arizona based company are nursing a 59% decline since the start of the year. Freeport announced a month ago it is cutting in half output at is El Abra mine in Chile and idling two US mines.

The copper industry has a long history of these supply-side surprises.

Typical disruptions associated with adverse weather (Freeport has predicted lower output at the massive Grasberg mine in Indonesia related to El Niño weather patterns), technical problems, power shortages and labour activity coupled with falling grades and dirty concentrates at old mines (especially true in Chile) make forecasting a tough proposition.

The copper industry has a long history of these supply-side surprises

Add to those factors project deferrals, commissioning delays, slower ramp-ups, mothballing and downsizing of mine plans due to the declining price environment of the last two-three years and it becomes easier to understand why forecasts are all over the place.

Last week Goldman Sachs predicted the slump in the copper price could last years due to the slowdown in China and that prices will probably drop to $4,800 a metric ton by the end of December and $4,500 at the end of next year as the market suffers from oversupply of 530,000 tonnes next year 2016 rising through 2019 to reach 657,000 tonnes oversupply.

On the opposing side independent research house Capital Economics forecasts a strong pickup in the price of copper towards the end the year on the back of lower than expected mine supply growth and output disruptions.

Senior commodities economist Caroline Bain says Chile’s recent earthquake highlights these risk. Although output was only interrupted briefly, the earthquake and tsunami that struck the South American nation halted operations at the Los Pelambres and Andina mines, which together produce  600,000 tonnes of copper.

Apart from the effects of El Niño (low rainfall is behind the Grasberg output reduction, but on the other side of the ocean the occurrence causes flooding), ongoing strikes and protests, Bain also points to relatively low warehouse inventories which in the case of LME stocks represent only 2–3 weeks of annual consumption for the bullish case.

The house view at Capital Economics is for the price of copper to reach US$6,250 per tonne by end-year, rising to $7,000 by end-2016.

Copper leads fall in metal prices on China worries

Copper led losses in industrial metals, falling by 2% while zinc dropped to a five-year low, on uncertain demand from China. The plunge also sent the shares in some of the world’s largest mining companies tumbling while hurting copper-dependent economies from Chile to Zambia.

Freeport-McMoRan (NYSE:FCX), the world's largest publicly traded copper producer, fell as much as 4% at $10.11. Rival BHP Billiton (NYSE:BHP) was trading 4.3% to $32.68 at noon, while Southern Copper (NYSE:SCCO) was down around 2.3%.

In Canada, First Quantum Minerals (TSE:FM) and Teck Resources (TSE:TCK.B) sank at least 9% as copper for delivery in three months dropped to a two-week low. While Lundin Mining (TSE:LUN) followed closely, losing almost 7% of its stock value at noon ET.

Copper and other metals have suffered from a slowing Chinese economy and a shift in growth towards sectors that require less commodity imports.

So far, copper prices have failed to react significantly to news of supply disruptions in Zambia and Chile, remaining more responsive to news from China, the world’s largest consumer, accounting for about 45% of world demand last year.

Codelco, Antofagasta halt operations after Chile earthquake

The quake is the latest natural catastrophe to roil mining in copper-rich Chile, which accounts for a third of global red metal output. (Image courtesy of USGS)

Mining operations were suspended at two major copper mines in Chile after a magnitude 8.3 earthquake struck off the coast of the country on Wednesday, killing at least five people and slamming powerful waves into coastal towns.

The closure of the mines, operated by Codelco and Antofagasta (LON:ANTO), pushed copper prices on the London Metal Exchange to two-month highs in early Asian trading as worries about supply disruptions offset lingering concerns about demand from China amid copper's longest rout in years.

Operations were cancelled for safety reasons as several aftershocks, including one at magnitude-7 and four above 6, continue to shake the region after the initial earthquake.

The companies said no damages have been registered at the mines, but operations were cancelled for safety reasons as several aftershocks, including one at magnitude-7 and four above 6, continue to shake the region after the initial earthquake.

By mid-morning Eastern Time, prices had come back down to around $5,340 as most miners with operations in Chile updated their status saying that workers were safe and mines were undamaged.

Codelco suspended open-pit operations at its Andina mine and evacuated workers at its smaller Las Ventanas refining and smelting division, as well as at the two northern ports of Mejillones and Barquito, as a precautionary measure. By Thursday morning, the state-owned company said (in Spanish) that Ventanas was operating as usual, while Andina remains halted until inspections have conclude, which is expected to happen later today.

London-listed Antofagasta said its flagship Los Pelambres mine, which produced over 400,000 tonnes of copper last year, will remain closed until further notice, though there were no reports of damage to personnel or equipment.

Chile, the world's top copper producer, is one of the most earthquake-prone nations in the world. It was hit by an 8.8-magnitude quake in 2010 and in 1960 recorded the largest ever on Earth, according to the U.S. Geological Survey.

Earlier this year unusual heavy rains caused flooding and forced producers to shut many minesin Chile's copper-rich north.

Copper price rallies 6%

In New York trade on Friday copper for delivery in December soared nearly 6% at the open, jumping to a seven-week high following the announcement of steep production cuts by Glencore and a surge in Chinese concentrate imports.

Copper changed hands for $2.448 per pound or around $5,390 a tonne, up 5.9% from yesterday's close of $2.312.

The red metal has recovered strongly from six-year lows struck late August, but remains down 14% year to date after a 16% fall in 2014. The metal peaked in February 2011 at $4.58 a pound or more than $10,000 a tonne.

Glencore (LON:GLEN), the world's number four producer of the metal, on Monday announced plans to suspend production at its copper mines in the Democratic Republic of Congo and Zambia, in a move that it says will take 400,000 tonnes out of the market.

"It just goes to show how far we have gone down for the industry to withstand further falls in the commodity prices"

Some 40% of the Swiss commodities trader's earnings come from copper. Glencore's move comes on the heels of cutbacks from US-based Freeport-McMoRan (NYSE:FCX) which vies with Chile's state-owned Codelco as the world number one copper miner in terms of output.

Copper was also boosted after trade data from top consumer China showed  a huge improvement in country's imports of copper concentrate.

While imports of refined and semi-finished copper products were flat in August imports of concentrate surged nearly 20% from a year ago and 18.6% from the previous month. Year to date concentrate imports are up 12% to 8.12 million tonnes, while refined copper imports are down 8%.

Senior metals and mining research analyst at Sanford Bernstein, Paul Gait told CNBC following Glencore's announcement that "it just goes to show how far we have gone down for the industry to withstand further falls in the commodity prices":

"This is close to the bottom of the cycle for commodities; it certainly feels like that from my perspective, signs today are indicative of that," Gait said."

I think the pop today is really in relation to China and expectations of continued stimulus

Others were not so encouraging with Philip Petursson, managing director for capital markets and strategy at Manulife Asset Management telling Reuters that "at this point I would say you'd still want to be cautious on the miners as well as the energy sector:"

"I think the pop today is really in relation to China and expectations of continued stimulus. How much that helps to prop up the metals is subject to pretty wide debate. We're still in a supply glut situation."

The advance in the copper price led to widespread share price gains among copper mining majors with Glencore jumping for a second day for a 12% rally since Monday's open in London.

Freeport investors returning from a long weekend in North America chased the counter 6.4% higher in afternoon dealings with more than 31 million shares in the owner of the iconic Grasberg mine exchanging hands.

BHP Billiton (NYSE:BHP) also recovered with shares in the world's number one miner adding 4.7% in New York. The Melbourne-based company which relies on copper for around a fifth of its earnings is now worth $93 billion.

The world's second largest miner based on revenue Rio Tinto (NYSE:RIO) which is less dependent on copper than Glencore or BHP gained 5.1% in New York recovering from steep falls on Friday. The Anglo-Australian giant is worth $65 billion in New York.

The world's fifth largest miner Anglo American (LON:AAL) was the best performer on the day, surging nearly 7.6% in New York. Canada's Teck Resources (TSX:TCK) also made huge strides with shares in the coal and base metal company adding 8.3%.

Southern Copper Corp (NYSE:SCCO) increased 5.5% in value while investors in fellow South American copper producer Antofagasta's (LON:ANTO) celebrated a 9.9% surge in New York.

Glencore fights back — to slash debt by $10bn, halt copper mines in Africa

Mining and commodities giant Glencore (LON:GLEN), which in recent weeks become the poster child of how hard companies have been hit by a brutal sell-off in raw materials, is fighting back.

The Swiss-based company unveiled Monday a $10 billion package of debt-reduction measures, which include issuing up to $2.5bn of new shares, cutting dividends, selling assets and looking to offload a stake in its agricultural business to a third party.

Glencore also said it plans to suspend production at its copper mines in the Democratic Republic of Congo and Zambia, in a move that it says will take 400,000 tonnes out of the market

Glencore also said it plans to suspend production at its copper mines in the Democratic Republic of Congo and Zambia, in a move that it says will take 400,000 tonnes out of the market and potentially provide a boost to metals prices.

Investors reacted positively to the news, sending the company’s shares up about 12% before paring gains a touch to trade 6.5% higher at about 131 pence at 12:40 pm GMT.

At the same time, the announcement of a upcoming stoppage at Glencore’ Mopani operation in Zambia and the Katanga facility in the DRC had an immediate effect on copper prices, with the red metal climbing more than 1% to $5,192 a tonne on the London Metal Exchange.

Shanghai Futures Exchange copper rose 0.8% to 39,370 yuan ($6,183) a tonne.

Glencore CEO Ivan Glasenberg said in a statement that the measures announced today wouldn’t affect the firm’s core business activities and overall franchise value.

However, he acknowledged that “recent stakeholder engagement in response to market speculation around the sustainability of our leverage highlights the desire to strengthen and protect our balance sheet amid the current market uncertainty.”

BoAML upgrade

Bank of America Merrill Lynch upgraded the company's rating to neutral following the plan's unveiling.

"Unlike other management teams in the sector, Glencore has acknowledged its debt problem and is taking steps to address it," BoAML said in an e-mailed note.

"We think the plan goes some way to addressing some of our concerns on Glencore's financing, we do still have a question mark on Chinese demand and hence (only) an upgrade to Neutral. Even after the reductions, the company will still be quite highly geared," the note said.

Glencore swung to a net loss of $676 million in its first half of the year from a profit of $1.7 billion in the same period last year due to write downs in the value of its mines and oil fields, which have been hit by a price slump.

The company is now worth a fraction of what it was when it made its first attempt a year ago at a "merger of equals" with Rio Tinto (LON:RIO), which is valued at $92.6 billion.

Chile’s copper exports down 24% in July

The latest statistics released by Chile’s central bank suggests significant drop in copper exports by the country during the month of July this year. Chile’s copper exports plunged nearly 24% year-on-year. The value of exports amounted to $2.398 billion during the month in comparison with the value of $3.171 billion during the same month a year before.

The sharp plunge in copper prices led to decline in copper exports by the country. The copper prices averaged at $2.48 per lb during July this year, almost 23% down when compared with $3.22 per lb during July 2014. The exports of cathode during the month dropped by nearly 19% to $1.102 billion, whereas the concentrate exports plunged heavily by 23% to $1.023 billion.

The cumulative copper exports by Chile during the initial seven-month period of the year amounted to $19.352 billion, down by 13% when compared with the previous year. The copper exports during January to July last year had totaled $22.244 billion. Exports of cathode dropped by 16% year-on-year to $8.796 billion, whereas those of concentrate declined by 6% to $8.898 billion.

The copper production by Chile is expected to total 5.8 million mt during the entire year 2015. Incidentally, Chile is the world’s largest copper producing nation.

Meantime, a report recently published by the Chilean Copper Commission (Cochilco) states that lack of up-to-date technology could lead to sharp decline in country’s copper production after 2025. According to the report, Chile may increase its copper output to almost 10 million mt by 2025, but several factors could lead to decline in output thereafter. The lack of new discoveries and complication in expansion of existing mines are cited as the key reasons behind the projected fall in copper output by Chile.

Codelco halts world's largest open pit copper mine over strike

A week-long strike by contract workers at world’s No.1 copper producer Codelco spread Tuesday to Chuquicamata, the Chilean company’s second largest mine, forcing the miner to halt operations.

Protesters began demonstrations on July 21 in demand for better pay and working conditions, blocking roads into some of the country's largest copper mines.

Things took a turn for the worse Friday, when a worker was shot dead by police near Codelco's smaller Salvador mine in northern Chile. Strikers then proceeded to seize control of the operation over the weekend and it remains occupied by the protesters, Cooperatival.cl reported(in Spanish).

Striking workers want Codelco to join their negotiations with the mining company's contractors and subcontractors, but the state-owned miner has so far declined.

Chuquicamata, which is located 1,650 km north of the Chilean capital of Santiago, is Codelco’s main division, accounting for over 40% of the miner’s total production in 2014.

Chuquicamata, which is located 1,650 km north of the Chilean capital of Santiago, is Codelco’s main division, accounting for over 40% of the miner’s total production in 2014.

The copper giant is in the midst of executing a $25 billion investment plan aimed to expand its decades-old flagship mines and search for new high-grade deposits.

Copper, which accounts for 60% of Chile's exports and 15% of gross domestic product, has lost 11% of its value during the past year. Only yesterday it hit a six-year low as slowing demand in China increased concerns over a glut.

Copper may drop in the short term: SMM Survey

Copper prices are expected to trade lower in short term, as per the latest survey conducted by the Shanghai Metals Market among Chinese copper plate/sheet, strip and foil producers.

According to the survey, 36% of Chinese producer expect copper prices to fall in the short term.

“Both LME and SHFE reported growth in copper inventories recently, while consumption is still sluggish in the offseason for downstream sectors, so copper prices will face downside risk,” these producers told SMM.

Another 32% of produces believe copper prices will move sideways, noting that the strong dollar will place pressure on base metals, but on the bright side, China’s stock market seemed to stabilize lately, which may help restore confidence. Technical indicators point to both support and resistance for copper prices, these producers added.

Only 5% of the surveyed see copper prices to rise considering positive reports from macro front.

“The Greek government secured another bailout recently and China’s stock market leveled out, these factors will shore up market and benefit risky assets, including the red metal,” a few producers said.

The remaining 27% are not sure about the price trends.

Will Copper Break below the January Trough?

Weak demand, declining trading activities and China’s poor data are pushing copper prices towards a low last seen in mid-January.

What’s next? Is the red metal falling below the January trough?

“Copper price dropped to a low never seen since 2009 in January, but this may not be the bottom for 2015 if you look at the data for construction,” said analyst of Everbright Futures.

The analyst explained that although home sales picked up, housing starts remained weak, presaging poor copper demand in the latter half of the year.

“Falling fixed asset investment means the economic growth will be less dependent on investment, which is certainly bad news for copper market,” analyst from Guotai Junan Futures told SMM.

Image Source: fastmarkets.com

Peru's metal output rises in April, silver production lags

The production of almost all major metals by Peru reported robust growth in Peru during the month of April this year. While the output of copper, gold and zinc reported significant increase during the month, silver production declined, in accordance with the official government data released yesterday.

According to data released by the Energy and Mines Ministry, copper production rose 18.5% from 103,410 mt in April last year to 122,506 mt in Apr ’15. The decline in copper output from Freeport-McMoRan's Cerro Verde was offset by increased mine output from Antamina, Southern Copper, Toromocho and Antapaccay mines.

The increased output from Newmont and Barrick gold mines contributed to the 15% growth in gold production during April this year. The gold production totaled 379,504 Oz in Apr ’15, in comparison with the output of 330,273 Oz during the same month a year before.

Silver production dropped marginally by 0.4% over the year from 9.57 MOz to 9.53 MOz in April. The output from Antamina mines dropped significantly, whereas Buenaventura and Volcan reported rise in silver production during the month.

Zinc production rose 17.7% from 97,128 mt a year before to 114,323 mt in Apr ’15. Lead output too rose 27% from 97,128 mt to 114,323 mt over the previous year. Lead output witnessed sharp increase in Antamina, Volcan and Milpo. Molybdenum output too jumped 45% to 1,632 mt in April 2015.

Meantime, tin production by Minsur- the country’s only tin producer, rebounded sharply in April this year, rising nearly 15% from 1,438 mt in April 2014 to 1,654 mt in April this year.

Copper submerges below $6000 as global factories sputter

(Reuters) -Copper prices slid back below the $6,000 a tonne mark on Tuesday, after a string of global manufacturing reports revealed only modest demand growth for metals with just one month left of the normally strongest quarter for seasonal demand.

FUNDAMENTALS

* Three-month copper on the London Metal Exchange slipped by 0.4 percent to $5,999 a tonne by 1241 GMT, after closing little changed in the previous session when it plumbed its lowest since April 24 at $5,985 a tonne.

* The most-traded August copper contract on the Shanghai Futures Exchange slipped 0.6 percent to 43570 yuan ($7,029) a tonne.

* Manufacturing activity showed few signs of picking up across Europe, Asia or the Americas in May as demand stayed stubbornly weak, highlighting the need for central banks to continue supporting economic growth.

* The leaders of Germany, France and Greece's international creditor institutions agreed late on Monday to work with "real intensity" in the coming days as they try to clinch a deal in debt negotiations with Athens.

* U.S. consumer spending growth unexpectedly stalled in April as households cut back on purchases of automobiles and continued to boost savings, suggesting the economy was struggling to gain momentum early in the second quarter.

* Mining conflicts in Peru, a top global minerals exporter, will likely heat up ahead of presidential and congressional elections next year as political outsiders whip up anti-mining sentiment, government officials and business leaders said.

($1 = 6.1985 Chinese yuan renminbi)

World Biggest Mining Companies Betting on Copper

There’s still some uncertainty regarding how soon copper will shift into deficit. However, positive arguments for the copper price got some support on Friday when a report from Bloomberg stated that five of the world’s largest mining companies have all said good things about the red metal over the last month.

 

BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT) CEO Andrew Mackenzie sees copper as the exception in an otherwise uninspiring market space, while Jean-Sebastien Jacques of Rio Tinto’s (NYSE:RIO,ASX:RIO,LSE:RIO) copper division simply said in an interview, “we love copper.”

 

Meanwhile, Antofagasta’s (LSE:ANTO) Diego Hernandez continues to be skeptical of a copper surplus, with Glencore (LSE:GLEN) CEO Ivan Glasenberg echoing that sentiment, telling shareholders on May 7 that his company believes copper is moving into deficit. For his part, Freeport-McMoRan (NYSE:FCX) Chief Executive Richard Adkerson has reaffirmed his belief in copper’s strong mid- to long-term fundamentals.

 

Overall, it looks like there’s a fairly similar message coming from all five miners. That’s worth some attention from investors given that the companies certainly haven’t seen eye to eye on a number of other issues as of late. For example, Rio Tinto CEO Sam Walsh has held strong to plans to continue growing the company’s iron ore exports, while BHP has indicated that it will slow its iron ore expansion program.

 

Deficit timeline uncertain

 

Recently, Rio changed its prediction regarding a copper surplus, saying that a deficit will come sooner than expected. “If you had asked me the question in December last year I would have said the inflection point would be three or four years down the road and today it is likely to be 18-24 months down the road,” Jacques told the Financial Times in an interview earlier this month. This week, the company reached an agreement with the government of Mongolia for a $5-billion expansion at its Oyu Tolgoi mine.

 

On top of that, a growing number of analysts are predicting that a deficit will come sooner rather than later. Mineweb’s Kip Keen has pointed out that a growing number of companies and analysts are turning more positive on copper, and while firms like Thomson Reuters GFMS and the International Copper Study Group are still calling for a surplus this year, most see a growing deficit coming within the next 10 years due to a lack of new mines set to come online in the medium term.

 

Cast in point: Thomson Reuters is forecasting that this year the copper price will average 12 percent lower than in 2014, but sees the incentive price for new mine development as being $7,073 per tonne; it believes the metal could rise that high within two to three years. Further, Cormark Securities said in March that it’s staying bullish on copper in the medium term, while Macquarie Research and Dundee Securities also see copper prices rising.

 

The upshot 

 

The spot copper price was down last week, having lost nearly 4 percent to close at $2.79 per pound. Still, the red metal has risen about 8 percent in the last three months, taking back a respectable portion of its losses from the beginning of the year.

 

In any case, at least some market watchers are responding well to the world’s biggest mining companies and their attraction to copper. Forbes contributor Trefis has upped its price estimate for Freeport-McMoRan from $17.41 to $21.62, largely on what it sees as improved pricing environments for copper and oil, and the company’s share price has managed to gain about $0.42 over the past month.